Approximate date of commencement of proposed sale to the
public: As soon as practicable after this
registration statement becomes effective.

If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act, check the following
box: o

If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering. o

If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o

If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated
filer o

Accelerated
filer o

Non-accelerated
filer þ
(Do not check if a smaller reporting company)

Smaller reporting
company o

CALCULATION OF
REGISTRATION FEE

Proposed Maximum

Aggregate

Amount of

Offering

Registration

Title of Each Class of Securities to be Registered

Price(1)(2)

Fee

Common Stock, $0.0002 par value per share

$150,000,000

$17,415

(1)

Estimated solely for the purpose of
computing the amount of the registration fee pursuant to
Rule 457(o) under the Securities Act of 1933, as amended.

(2)

Includes the aggregate offering
price of additional shares that the underwriters have the option
to purchase.

The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.

The
information in this preliminary prospectus is not complete and
may be changed. These securities may not be sold until the
registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an
offer to sell nor does it seek an offer to buy these securities
in any jurisdiction where the offer or sale is not permitted.

Subject To Completion. Dated
March 9, 2011.

Shares

Common
Stock

This is an initial public offering of shares of common stock of
Fusion-io, Inc.

Fusion-io is
offering
shares of its common stock in this offering.

Prior to this offering, there has been no public market for the
common stock. It is currently estimated that the initial public
offering price per share will be between
$ and
$ . Application will be made for
listing on the New York Stock Exchange under the symbol
FIO.

See Risk Factors on page 7 to read about
factors you should consider before buying shares of the common
stock.

Neither the Securities and Exchange Commission nor any other
regulatory body has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.

Per Share

Total

Initial public offering price

$

$

Underwriting discounts and commissions

$

$

Proceeds, before expenses, to Fusion-io

$

$

To the extent that the underwriters sell more
than shares
of common stock, the underwriters have the option to purchase up
to an
additional shares
from Fusion-io
and shares
from the selling stockholders identified in this prospectus at
the initial public offering price, in each case, less the
underwriting discount. Fusion-io will not receive any of the
proceeds from the sale of the shares being sold by the selling
stockholders.

The underwriters expect to deliver the shares against payment in
New York, New York
on ,
2011.

Through and
including ,
2011 (the 25th day after the date of this prospectus), all
dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealers obligation to
deliver a prospectus when acting as an underwriter and with
respect to an unsold allotment or subscription.

We have not authorized anyone to provide you with information or
to make any representations other than those contained in this
prospectus or in any free writing prospectuses we have prepared.
We take no responsibility for, and provide no assurance as to
the reliability of, any other information that others may give
you. This prospectus is an offer to sell only the shares offered
hereby, but only under circumstances and in jurisdictions where
it is lawful to do so. The information contained in this
prospectus is current only as of the date of its date.

This summary highlights information contained elsewhere in
this prospectus. You should read the following summary together
with the more detailed information appearing in this prospectus,
including Risk Factors, Selected Consolidated
Financial Data, Managements Discussion and
Analysis of Financial Condition and Results of Operations,
Business and our consolidated financial statements
and related notes, before deciding whether to purchase shares of
our capital stock. Unless the context otherwise requires, the
terms Fusion-io, the company,
we, us and our in this
prospectus refer to Fusion-io, Inc., and its subsidiaries. Our
fiscal year end is June 30 and our fiscal quarters end on
September 30, December 31, March 31, and
June 30. Our fiscal years ended June 30, 2008, 2009
and 2010 and our fiscal year ending June 30, 2011 are
referred to herein as fiscal 2008, 2009, 2010 and 2011,
respectively.

FUSION-IO,
INC.

Our
Company

We have pioneered a next generation storage memory platform for
data decentralization. Our platform significantly improves the
processing capabilities within a datacenter by relocating
process-critical, or active, data from centralized
storage to the server where it is being processed, a methodology
we refer to as data decentralization. Our integrated hardware
and software solutions leverages non-volatile memory to
significantly increase datacenter efficiency and offers
enterprise grade performance, reliability, availability and
manageability. We sell our solutions through our global direct
sales force, original equipment manufacturers, including Dell,
HP and IBM, and other channel partners. Since inception, we have
shipped solutions aggregating over 20 petabytes of enterprise
class storage memory capacity to more than 1,000 end-users.

Our data decentralization platform can transform legacy
architectures into next generation datacenters and allows
enterprises to consolidate or significantly reduce complex and
expensive high performance storage, high performance networking
and memory-rich servers. Our platform enables enterprises to
increase the utilization, performance and efficiency of their
datacenter resources and extract greater value from their
information assets. Many users of our platform have reported
achieving greater than 10 times the application throughput per
server through increased server utilization, resulting in
reductions to ongoing facility, energy and cooling expenses.

Industry
Background

Enterprises are increasingly dependent on their ability to
rapidly extract value from their information assets. At the same
time, enterprises are facing multiple challenges associated with
managing their information assets. These challenges include: the
exponential growth in data; increasing demand for frequent
access to this data from the growing number of
Internet-connected devices; and growing demand by users for
faster and more relevant information. Enterprises are deploying
increasing amounts of datacenter infrastructure in an attempt to
address these challenges, which, in turn, is creating pressure
on their budgets and administrative resources.

Legacy datacenter architectures using centralized storage cannot
effectively supply the increasingly large quantities of
process-critical data quickly enough to fully utilize the
processing capacity of todays servers, creating what we
refer to as the data supply problem. This problem results in an
increasing number of underutilized servers. While processing
performance has doubled approximately every 18 months, the
performance of the storage infrastructure has not kept pace, and
this increasing gap between processing and storage performance
is amplifying the data supply problem.

rich servers; scaling out datacenters; tuning and redesigning
applications; utilizing cloud-based services; and deploying
virtual servers. Based on IDC data, we estimate that
approximately $52 billion will be spent in 2011 on high
performance storage and networking and memory-rich servers,
excluding related spending on software and
services.(1)

Manage Growth in Quantity of Data  By
transforming commodity non-volatile memory into a high capacity
storage memory tier in the server and leveraging our automated
data-tiering software, we enable enterprises to more efficiently
manage the exponential growth in data;

Reduce Total Cost of Ownership and Environmental
Impact  Our platform enables customers to reduce
their datacenter infrastructure footprint, administrative
expenses and energy consumption related to power and cooling;



Unlock the Potential of Virtualization  Our
platform enables more virtual servers and desktops to be
deployed per physical server without experiencing the
performance issues caused by data supply constraints; and



Enhance the Performance of Clouds and SaaS 
Our platform allows cloud service providers and
software-as-a-service vendors to significantly enhance the
performance of the services they offer and improve their
underlying cost structures.

Our
Strategy

Our objective is to expand our position as the leading provider
of storage memory platforms for data decentralization. The
principal elements of our strategy include:



leverage our first-to-market and leading position in data
decentralization;



continue our focus on platform solutions;



extend our platform differentiation through software innovation;



develop and maintain direct customer engagement;



leverage and expand our server OEM customer relationships; and



pursue international growth opportunities.

(1) See
IDC note (1) set forth in the section entitled
Market, Industry and Other Data.

Our business is subject to numerous risks and uncertainties,
including those highlighted in the section entitled Risk
Factors immediately following this prospectus summary.
Some of these risks are:



our limited operating history makes it difficult to evaluate our
current business and future prospects;



our revenue growth rate in recent periods is not expected to
recur in the near term and may not be indicative of our future
performance;



we have incurred significant net losses to date and may not
achieve or maintain profitability;



we expect large and concentrated purchases by a limited number
of customers to continue to represent a substantial majority of
our revenue, and any loss or delay of expected purchases could
adversely affect our operating results;



we expect that we will depend on OEMs incorporating our products
into their product offerings and their sales efforts to increase
our revenue;

we compete with large storage and software providers and expect
competition to intensify in the future.

Corporate
Information

Our principal executive offices are located at
2855 E. Cottonwood Parkway, Suite 100, Salt Lake
City, Utah 84121, and our telephone number is 801.424.5500. Our
website is www.fusionio.com. Information contained on, or that
can be accessed through, our website is not incorporated by
reference into this prospectus, and you should not consider
information on our website to be part of this prospectus. We
were incorporated in December 2005 as Canvas Technologies, Inc.,
a Nevada corporation. In June 2006, we changed our name to
Fusion Multisystems, Inc. In June 2010, we changed our name to
Fusion-io, Inc. and reincorporated as a Delaware corporation.

The Fusion-io design logo and the marks Fusion-io,
directCache, ioDirector,
ioDrive, ioDrive Duo, ioDrive
Octal, ioManager, ioMemory and
ioSphere are our trademarks. This prospectus
contains additional trade names, trademarks and service marks of
other companies. We do not intend our use or display of other
companies trade names, trademarks or service marks to
imply a relationship with, or endorsement or sponsorship of us
by, these other companies.

Option to purchase additional shares from us and the selling
stockholders

shares

Use of Proceeds

We plan to use the net proceeds of this offering for working
capital and general corporate purposes, including possible
acquisitions of, or investments in, businesses, technologies or
other assets. See Use of Proceeds.

Proposed NYSE symbol

FIO

The number of shares of common stock that will be outstanding
after this offering is based on 66,496,632 shares
outstanding as of December 31, 2010, and excludes:



21,938,786 shares of common stock issuable upon the
exercise of options outstanding as of December 31, 2010 at
a weighted-average exercise price of $1.11 per share;



4,898,550 shares of common stock issuable upon the exercise
of options granted between January 1, 2011 and
February 28, 2011 at an exercise price of $5.12 per share;



60,000 shares of common stock issued in February 2011;



12,500 shares of common stock issuable upon the exercise of
an outstanding warrant to purchase common stock, with an
exercise price of $1.96 per share;



125,800 shares of common stock issuable upon the exercise
of an outstanding warrant to purchase convertible preferred
stock, at an exercise price of $1.093 per share, which will be
exercisable for an equivalent number of shares of common stock
following this offering; and



unallocated shares of common stock reserved for future issuance
under our stock-based compensation plans, consisting of
6,050,466 shares of common stock reserved for future
issuance under our 2010 Executive Stock Incentive Plan or our
2008 Stock Incentive Plan (including options to purchase shares
of common stock granted between January 1, 2011 and
February 28,
2011), shares
of common stock reserved for future issuance under our 2011
Equity Stock Incentive Plan, which will become effective upon
completion of this offering,
and shares
of common stock reserved for future issuance under our 2011
Employee Stock Purchase Plan, which will become effective upon
completion of this offering.

Except as otherwise indicated, all information in this
prospectus assumes:



the automatic conversion of all outstanding shares of our
convertible preferred stock into an aggregate of
52,489,072 shares of common stock, effective immediately
prior to the completion of this offering;



the filing of our amended and restated certificate of
incorporation in Delaware upon the completion of this
offering; and



no exercise by the underwriters of their right to purchase up to
an
additional shares
of common stock from us and the selling stockholders.

The summary consolidated statements of operations data presented
below for the fiscal years ended June 30, 2008, 2009, and
2010 are derived from audited consolidated financial statements
that are included in this prospectus. The summary consolidated
statements of operations data for the six months ended
December 31, 2009 and 2010 and the consolidated balance
sheet data as of December 31, 2010 are derived from
unaudited consolidated financial statements that are included in
this prospectus. The unaudited consolidated financial statements
were prepared on a basis consistent with our audited financial
statements and include all adjustments, consisting of normal and
recurring adjustments that we consider necessary for a fair
presentation of the financial position and results of operations
as of and for such periods. Operating results for the six months
ended December 31, 2010 are not necessarily indicative of
the results that may be expected for the full fiscal year ending
June 30, 2011. You should read the following summary
consolidated financial data with Managements
Discussion and Analysis of Financial Condition and Results of
Operations, our consolidated financial statements, and the
notes to consolidated financial statements, which are included
in this prospectus.

Our consolidated balance sheet as of December 31, 2010 is
presented on:



an actual basis;



a pro forma basis, giving effect to (i) the automatic
conversion of all outstanding shares of our convertible
preferred stock into shares of common stock upon completion of
this offering and (ii) the reclassification of the
convertible preferred stock warrant liability to additional
paid-in-capital; and



a pro forma as adjusted basis, giving effect to the pro forma
adjustments and the sale
of shares
of common stock by us in this offering, based on an assumed
initial public offering price of $
per share, the midpoint of the range reflected on the cover page
of this prospectus, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses to be
paid by us.

The pro forma as adjusted information set forth in the table
below is illustrative only and will be adjusted based on the
actual initial public offering price and other terms of this
offering determined at pricing.

December 31, 2010

Pro Forma As

Actual

Pro Forma

Adjusted(1)

(In thousands)

Consolidated Balance Sheet Data:

Cash, cash equivalents and short-term investments

$

3,493

$

3,493

$

Inventories

48,450

48,450

48,450

Working capital

39,194

39,742

Total assets

71,256

71,256

Current and long-term deferred revenue

4,745

4,745

4,745

Current and long-term notes payable and capital lease obligations

11,309

11,309

11,309

Total liabilities

38,830

38,282

Total stockholders (deficit) equity

(71,339

)

32,974

(1)

Each $1.00 increase or decrease in the assumed initial public
offering price of $ per share, the
midpoint of the range reflected on the cover page of this
prospectus, would increase or decrease, as applicable, our cash,
cash equivalents and short-term investments, working capital,
total assets and total stockholders (deficit) equity by
approximately $ million,
assuming that the number of shares offered by us, as set forth
on the cover page of this prospectus, remains the same and after
deducting the estimated underwriting discounts and commissions
and estimated offering expenses to be paid by us.

Investing in our common stock involves a high degree of risk.
You should carefully consider the risks and uncertainties
described below, together with all of the other information in
this prospectus, including our consolidated financial statements
and related notes, before deciding whether to purchase shares of
our common stock. If any of the following risks actually occur,
our business, financial condition, operating results and
prospects could be materially and adversely affected. In that
event, the price of our common stock could decline, and you
could lose part or all of your investment.

Risks Related to
Our Business and Industry

Our limited
operating history makes it difficult to evaluate our current
business and future prospects, and may increase the risk of your
investment.

We were founded in December 2005 and sold our first products in
April 2007. The majority of our revenue growth has occurred
since the quarter ended December 31, 2009, and we are still
in the process of introducing critical components of our
software offerings, including our ioSphere and directCache
software, which are currently in customer trials and will be
released for general availability in the second half of fiscal
2011. In addition, our current management team has only been
working together for a short period of time. Our limited
operating history makes it difficult to evaluate our current
business and our future prospects, including our ability to plan
for and model future growth. We have encountered and will
continue to encounter risks and difficulties frequently
experienced by growing companies in rapidly changing industries,
such as the risks described in this prospectus. If we do not
address these risks successfully, our business and operating
results would be adversely affected, and our stock price could
decline.

Our revenue
growth rate in recent periods is not expected to recur in the
near term and may not be indicative of our future
performance.

You should not consider our revenue growth in recent periods as
indicative of our future performance. In fact, in future
periods, our revenue could decline. We do not expect to achieve
similar percentage revenue growth rates in future periods. We
have experienced in the past, and continue to expect to
experience, substantial concentrated purchases by customers to
complete or upgrade large-scale datacenter deployments. Our
revenue in any particular quarterly period could be
disproportionately affected if this trend continues. For
example, we expect the three months ending March 31, 2011
to include revenue associated with significant deployments by
two customers that we do not expect to make purchases at similar
levels in the subsequent three months. Accordingly, we currently
expect our revenue for the three months ending June 30,
2011 to be below the three months ending March 31, 2011.
You should not rely on our revenue for any prior quarterly or
annual periods as an indication of our future revenue growth. If
we are unable to maintain consistent revenue growth, our stock
price could be volatile, and it may be difficult to achieve and
maintain profitability.

We have
experienced rapid growth in recent periods and we may not be
able to sustain or manage any future growth
effectively.

We have significantly expanded our overall business, customer
base, headcount and operations since December 2009, and we
anticipate that we will continue to grow our business. For
example, from December 31, 2009 to December 31, 2010,
our headcount increased from 183 to 348 employees. Our
future operating results depend to a large extent on our ability
to successfully manage our anticipated expansion and growth.

To manage our growth successfully, we believe we must
effectively, among other things:

maintain and expand our existing original equipment
manufacturer, or OEM, and channel partner relationships and
develop new OEM and channel partner relationships;



forecast and control expenses;



recruit, hire, train and manage additional research and
development and sales personnel;



expand our support capabilities;



enhance and expand our distribution and supply chain
infrastructure;



manage inventory levels;



enhance and expand our international operations; and



implement and improve our administrative, financial and
operational systems, and procedures and controls.

We expect that our future growth will continue to place a
significant strain on our managerial, administrative,
operational, financial and other resources. We are likely to
incur costs associated with our future growth earlier than we
realize some of the anticipated benefits, and the return on
these investments may be lower, or may develop more slowly, than
we expect or may be nonexistent. If we are unable to manage our
growth effectively, we may not be able to take advantage of
market opportunities or develop new products or enhancements to
existing products and we may fail to satisfy end-users
requirements, maintain product quality, execute on our business
plan or respond to competitive pressures, each of which could
adversely affect our business and operating results.

We have
incurred significant net losses during our limited operating
history, expect to continue to incur net losses for the
foreseeable future and may not achieve or maintain
profitability.

We have incurred net losses in each quarter since our inception.
We incurred net losses of $8.2 million in the six months
ended December 31, 2010 and $31.7 million in fiscal
2010, and, as of December 31, 2010, we had an accumulated
deficit of approximately $77.1 million. We expect to
continue to incur losses in future periods as we increase our
expenses in all areas of our operations. If our revenue does not
increase to offset these expected increases in operating
expenses, we will not be profitable. Accordingly, we cannot
assure you that we will be able to achieve or maintain
profitability in the future.

We expect
large and concentrated purchases by a limited number of
customers to continue to represent a substantial majority of our
revenue, and any loss or delay of expected purchases could
adversely affect our operating results.

Historically, large purchases by a relatively limited number of
customers have accounted for a substantial majority of our
revenue, and the composition of the group of our largest
customers changes from period to period. Many of our customers
make concentrated purchases to complete or upgrade specific
large-scale data storage installations. These concentrated
purchases are short-term in nature and are typically made on a
purchase order basis rather than pursuant to long-term
contracts. During fiscal 2010 and the six months ended
December 31, 2010, sales to the 10 largest customers in
each period, including the applicable OEMs, accounted for
approximately 75% and 92% of revenue, respectively. Facebook,
Inc. is currently our largest customer and accounted for a
substantial portion of revenue during the six months ended
December 31, 2010. We expect revenue from sales to Facebook
and one other end-user to account for a substantial portion of
revenue for the three months ending March 31, 2011, but
that revenue from sales to Facebook and the other end-user will
decline significantly for the three months ending June 30,
2011 as they complete their planned deployments.

As a consequence of our limited number of customers and the
concentrated nature of their purchases, our quarterly revenue
and operating results may fluctuate from quarter to quarter and
are difficult to estimate. For example, any acceleration or
delay in anticipated product purchases or the acceptance of
shipped products by our larger customers could materially impact
our revenue and operating results in any quarterly period. We
cannot provide any assurance that we will be able to sustain or
increase our revenue from our large customers or that we will be
able to offset the discontinuation of concentrated purchases by
our larger customers with purchases by new or existing
customers. We expect that sales of our products to a limited
number of customers will continue to contribute materially to
our revenue for the foreseeable future. The loss of, or a
significant delay or reduction in purchases by, a small number
of customers could materially harm our business and operating
results.

Some of our
large customers require more favorable terms and conditions from
their vendors and may request price concessions. As we seek to
sell more products to these customers, we may be required to
agree to terms and conditions that may have an adverse effect on
our business or ability to recognize revenue.

Some of our large customers have significant purchasing power
and, accordingly, have requested and received more favorable
terms and conditions, including lower prices, than we typically
provide. As we seek to sell more products to this class of
customer, we may be required to agree to these terms and
conditions, which may include terms that affect the timing of
our revenue recognition or may reduce our gross margins and have
an adverse effect on our business and operating results.

The future
growth of our sales to OEMs is dependent on OEM customers
incorporating our products into their server and data storage
systems and the OEMs sales efforts. Any failure to grow
our OEM sales and maintain relationships with OEMs could
adversely affect our business, operating results and financial
condition.

Sales of our products to OEMs represent a significant portion of
our revenue and we anticipate that our OEM sales will constitute
a substantial portion of our future sales. In some cases, our
products must be designed into the OEMs products. If that
fails to occur for a given product line of an OEM, we would
likely be unable to sell our products to that OEM for such
product line during the life cycle of that product. Even if an
OEM integrates one or more of our products into its server, data
storage systems or appliance solutions, we cannot be assured
that its product will be commercially successful or that we will
receive any revenue as a result. Our OEM customers are typically
not obligated to purchase our products and can choose at any
time to stop using our products, if their own systems are not
commercially successful or if they decide to pursue other
strategies or for any other reason, including the incorporation
or development of competing products by these OEMs. Moreover,
our OEM customers may not devote sufficient attention and
resources to selling our products. We may not be able to develop
or maintain relationships with OEMs for a number of reasons,
including because of the OEMs relationships with our
competitors or prospective competitors or other incentives that
may not motivate their internal sales forces to promote our
products. Even if we are successful in selling through OEMs, we
expect that sales through OEMs will be a lower gross margin
business than our direct sales business. If we are unable to
grow our OEM sales, if our OEM customers systems
incorporating our products are not commercially successful, if
our products are not designed into a given OEM product cycle or
if our OEM customers significantly reduce, cancel or delay their
orders with us, our revenue would suffer and our business,
operating results and financial condition could be materially
adversely affected.

If we are unable to properly forecast, monitor, control and
manage our inventory and maintain appropriate inventory levels
and mix of products to support our customers needs, we may
incur increased and unexpected costs associated with our
inventory. Sales of our products are generally

made through individual purchase orders and some of our
customers place large orders with short lead times, which makes
it difficult to predict demand for our products and the level of
inventory that we need to maintain to satisfy customer demand.
If we build our inventory in anticipation of future demand that
does not materialize, or if a customer cancels or postpones
outstanding orders, we could experience an unanticipated
increase in levels of our finished products. For example, as of
December 31, 2010, we had $48.5 million of inventory,
a large portion of which we purchased in anticipation of sales
during the following quarterly period. For some customers, even
if we are not contractually obligated to accept returned
products, we may determine that it is in our best interest to
accept returns in order to maintain good relationships with
those customers. Product returns would increase our inventory
and reduce our revenue. If we are unable to sell our inventory
in a timely manner, we could incur additional carrying costs,
reduced inventory turns and potential write-downs due to
obsolescence.

Alternatively, we could carry insufficient inventory, and we may
not be able to satisfy demand, which could have a material
adverse effect on our customer relationships or cause us to lose
potential sales.

We have recently experienced order changes including delivery
delays and fluctuations in order levels from
period-to-period,
and we expect to continue to experience similar delays and
fluctuations in the future, which could result in fluctuations
in inventory levels, cash balances and revenue.

The occurrence of any of these risks could adversely affect our
business, operating results and financial condition.

Our operating
results may fluctuate significantly, which could make our future
results difficult to predict and could cause our operating
results to fall below expectations.

Our operating results may fluctuate due to a variety of factors,
many of which are outside of our control. As a result, comparing
our operating results on a
period-to-period
basis may not be meaningful. You should not rely on our past
results as an indication of our future performance. If our
revenue or operating results fall below the expectations of
investors or any securities analysts that follow our company,
the price of our common stock would likely decline.

Factors that are difficult to predict and that could cause our
operating results to fluctuate include:



the timing and magnitude of orders, shipments and acceptance of
our products in any quarter;



our ability to control the costs of the components we use in our
hardware products;

The occurrence of any one of these risks could negatively affect
our operating results in any particular quarter and which could
cause the price of our common stock to decline.

Our sales
cycles can be long and unpredictable, particularly with respect
to large orders and OEM relationships, and our sales efforts
require considerable time and expense. As a result, it can be
difficult for us to predict when, if ever, a particular customer
will choose to purchase our products, which may cause our
operating results to fluctuate significantly.

Our sales efforts involve educating our customers about the use
and benefits of our products, including their technical
capabilities and cost saving potential. Customers often
undertake an evaluation and testing process that can result in a
lengthy sales cycle. We spend substantial time and resources on
our sales efforts without any assurance that our efforts will
produce any sales. In addition, product purchases are frequently
subject to budget constraints, multiple approvals and unplanned
administrative, processing and other delays. Additionally, a
significant portion of our sales personnel have been with us for
less than a year, and we continue to increase our number of
sales personnel, which could further extend the sales cycle as
these new personnel are typically not immediately productive.
These factors, among others, could result in long and
unpredictable sales cycles, particularly with respect to large
orders.

We also sell to OEMs that incorporate our solutions into their
products, which can require an extended evaluation and testing
process before our product is approved for inclusion in one of
their product lines. We also may be required to customize our
product to interoperate with an OEMs product, which could
further lengthen the sales cycle for OEM customers. The length
of our sales cycle for an OEM makes us susceptible to the risk
of delays or termination of orders if end-users decide to delay
or withdraw funding for datacenter projects, which could occur
for various reasons, including global economic cycles and
capital market fluctuations.

As a result of these lengthy and uncertain sales cycles of our
products, it is difficult for us to predict when customers may
purchase and accept products from us and as a result, our
operating results may vary significantly and may be adversely
affected.

We compete
with large storage and software providers and expect competition
to intensify in the future from established competitors and new
market entrants.

The market for data storage products is highly competitive, and
we expect competition to intensify in the future. Our products
compete with various traditional datacenter architectures,
including high performance server and storage approaches. These
may include the traditional data storage providers, including
storage array vendors such as EMC Corporation, Hitachi Data
Systems and NetApp, Inc., which typically sell centralized
storage products as well as high performance storage approaches
utilizing solid state drives, or SSDs, as well as vertically
integrated appliance vendors such as Oracle. In addition, we may
also compete with enterprise solid state disk vendors such as
Huawei Technologies, Co., Intel Corp., LSI Corporation, Micron
Technology, Inc., Samsung Electronics, Inc., Seagate Technology,
STEC, Inc., Toshiba Corp. and Western Digital Corp. A number of
new, privately held companies are currently attempting to enter
our market, some of which may become significant competitors in
the future.

Many of our current competitors have, and some of our potential
competitors could have, longer operating histories, greater name
recognition, larger customer bases and significantly greater
financial, technical, sales, marketing and other resources than
we have. Potential customers may prefer to purchase from their
existing suppliers rather than a new supplier regardless of
product performance or features. New
start-up
companies continue to innovate and may invent similar or
superior products and technologies that may compete with our
products and technology. Some of our competitors have made
acquisitions of businesses that may allow them to offer more
directly competitive and comprehensive solutions than they had
previously offered. In addition, some of our competitors,
including our OEM customers, may develop competing technologies
and sell at zero or negative margins, through

product bundling, closed technology platforms or otherwise, to
gain business. Our current and potential competitors may also
establish cooperative relationships among themselves or with
third parties. As a result, we cannot assure you that our
products will continue to compete favorably, and any failure to
do so could seriously harm our business, operating results and
financial condition.

Competitive factors could make it more difficult for us to sell
our products, resulting in increased pricing pressure, reduced
gross margins, increased sales and marketing expenses, longer
customer sales cycles and failure to increase, or the loss of,
market share, any of which could seriously harm our business,
operating results and financial condition. Any failure to meet
and address these competitive challenges could seriously harm
our business and operating results.

The market for
non-volatile, storage memory products is relatively undeveloped
and rapidly evolving, which makes it difficult to forecast
end-user adoption rates and demand for our
products.

The market for non-volatile, storage memory products is
relatively undeveloped and rapidly evolving. Accordingly, our
future financial performance will depend in large part on growth
in this market and on our ability to adapt to emerging demands
in this market. Sales of our products currently are dependent in
large part upon demand in markets that require high performance
data storage solutions such as computing, Internet and financial
services. It is difficult to predict with any precision end-user
adoption rates, end-user demand for our products or the future
growth rate and size of our market. The rapidly evolving nature
of the technology in the data storage products market, as well
as other factors that are beyond our control, reduce our ability
to accurately evaluate our future outlook and forecast quarterly
or annual performance. Our products may never reach mass
adoption, and changes or advances in technologies could
adversely affect the demand for our products. Further, although
Flash-based data storage products have a number of advantages
compared to other data storage alternatives, Flash-based storage
devices have certain disadvantages as well, including a higher
price per gigabyte of storage, potentially shortened product
lifespan, more limited methods for data recovery and lower
performance for certain uses, including sequential
input / output transactions and increased utilization
of host system resources than traditional storage, and may
require end-users to modify or replace network systems
originally made for traditional storage media. A reduction in
demand for Flash-based data storage caused by lack of end-user
acceptance, technological challenges, competing technologies and
products or otherwise would result in a lower revenue growth
rate or decreased revenue, either of which could negatively
impact our business and operating results.

If our
industry experiences declines in average sales prices, it may
result in declines in our revenue and gross
profit.

The data storage products industry is highly competitive and has
historically been characterized by declines in average sales
prices. It is possible that the market for decentralized storage
solutions could experience similar trends. Our average sales
prices could decline due to pricing pressure caused by several
factors, including competition, the introduction of competing
technologies, overcapacity in the worldwide supply of
Flash-based or similar memory components, increased
manufacturing efficiencies, implementation of new manufacturing
processes and expansion of manufacturing capacity by component
suppliers. If we are required to decrease our prices to be
competitive and are not able to offset this decrease by
increases in volume of sales or the sales of new products with
higher margins, our gross margins and operating results would
likely be adversely affected.

Developments
or improvements in storage system technologies may materially
adversely affect the demand for our products.

Significant developments in data storage systems, such as
advances in solid state storage drives or improvements in
non-volatile memory, may materially and adversely affect our
business and prospects in ways we do not currently anticipate.
For example, improvements in existing data storage technologies,
such as a significant increase in the speed of traditional
interfaces for transferring data

between storage and a server or the speed of traditional
embedded controllers could emerge as preferred alternative to
our products especially if they are sold at lower prices. This
could be the case even if such advances do not deliver all of
the benefits of our products. Any failure by us to develop new
or enhanced technologies or processes, or to react to changes or
advances in existing technologies, could materially delay our
development and introduction of new products, which could result
in the loss of competitiveness of our products, decreased
revenue and a loss of market share to competitors.

We derive all
of our revenue from a single line of products, and a decline in
demand for these products would cause our revenue to grow more
slowly or to decline.

Our storage memory product line accounts for substantially all
of our revenue and will continue to do so for the foreseeable
future. As a result, our revenue could be reduced by:

any decline or fluctuation in demand for our storage memory
products, whether as a result of product obsolescence,
technological change, customer budgetary constraints or other
factors;



the introduction of products and technologies that serve as a
replacement or substitute for, or represent an improvement over,
these products; and



our inability to release enhanced versions of our products,
including any related software, on a timely basis.

If the storage markets grow more slowly than anticipated or if
demand for our products declines, we may not be able to increase
our revenue sufficiently to achieve and maintain profitability
and our stock price would decline.

If we fail to
develop and introduce new or enhanced products on a timely
basis, including innovations in our software offerings, our
ability to attract and retain customers could be impaired and
our competitive position could be harmed.

We operate in a dynamic environment characterized by rapidly
changing technologies and industry standards and technological
obsolescence. To compete successfully, we must design, develop,
market and sell new or enhanced products that provide
increasingly higher levels of performance, capacity and
reliability and meet the cost expectations of our customers. The
introduction of new products by our competitors, the market
acceptance of products based on new or alternative technologies,
or the emergence of new industry standards could render our
existing or future products obsolete. Our failure to anticipate
or timely develop new or enhanced products or technologies in
response to technological shifts could result in decreased
revenue and harm our business. If we fail to introduce new or
enhanced products that meet the needs of our customers or
penetrate new markets in a timely fashion, we will lose market
share and our operating results will be adversely affected.

In order to maintain or increase our gross margins, we will need
to continue to create valuable software solutions to be
integrated with our storage memory products. Any new feature or
application that we develop or acquire may not be introduced in
a timely or cost-effective manner and may not achieve the broad
market acceptance necessary to help increase our overall gross
margins. If we are unable to successfully develop or acquire,
and then market and sell, additional software functionality,
such as our recently introduced ioSphere and directCache
software, our ability to increase our revenue and gross margin
will be adversely affected.

Our products
are highly technical and may contain undetected defects, which
could cause data unavailability, loss or corruption that might,
in turn, result in liability to our customers and harm to our
reputation and business.

Our storage memory products and related software are highly
technical and complex and are often used to store information
critical to our customers business operations. Our
products may contain undetected errors, defects or security
vulnerabilities that could result in data unavailability, loss
or corruption or other harm to our customers. Some errors in our
products may only be discovered after they have been installed
and used by customers. Any errors, defects or security
vulnerabilities discovered in our products after commercial
release could result in a loss of revenue or delay in revenue
recognition, injury to our reputation, a loss of customers or
increased service and warranty costs, any of which could
adversely affect our business. In addition, we could face claims
for product liability, tort or breach of warranty. Many of our
contracts with customers contain provisions relating to warranty
disclaimers and liability limitations, which may be difficult to
enforce. Defending a lawsuit, regardless of its merit, would be
costly and might divert managements attention and
adversely affect the markets perception of us and our
products. In addition, our business liability insurance coverage
could prove inadequate with respect to a claim and future
coverage may be unavailable on acceptable terms or at all. These
product-related issues could result in claims against us and our
business could be adversely impacted.

Our products
must interoperate with operating systems, software applications
and hardware that is developed by others and if we are unable to
devote the necessary resources to ensure that our products
interoperate with such software and hardware, we may fail to
increase, or we may lose, market share and we may experience a
weakening demand for our products.

Our products must interoperate with our customers existing
infrastructure, specifically their networks, servers, software
and operating systems, which may be manufactured by a wide
variety of vendors and OEMs. When new or updated versions of
these software operating systems or applications are introduced,
we must sometimes develop updated versions of our software so
that our products will interoperate properly. We may not
accomplish these development efforts quickly, cost-effectively
or at all. These development efforts require capital investment
and the devotion of engineering resources. If we fail to
maintain compatibility with these applications, our customers
may not be able to adequately utilize the data stored on our
products, and we may, among other consequences, fail to
increase, or we may lose, market share and experience a
weakening in demand for our products, which would adversely
affect our business, operating results and financial condition.

Our products
must conform to industry standards in order to be accepted by
customers in our markets.

Generally, our products comprise only a part of a datacenter.
The servers, network, software and other components and systems
of a datacenter must comply with established industry standards
in order to interoperate and function efficiently together. We
depend on companies that provide other components of the servers
and systems in a datacenter to support prevailing industry
standards. Often, these companies are significantly larger and
more influential in driving industry standards than we are. Some
industry standards may not be widely adopted or implemented
uniformly, and competing standards may emerge that may be
preferred by our customers. If larger companies do not support
the same industry standards that we do, or if competing
standards emerge, market acceptance of our products could be
adversely affected, which would harm our business, operating
results and financial condition.

We rely on our
key technical, sales and management personnel to grow our
business, and the loss of one or more key employees or the
inability to attract and retain qualified personnel could harm
our business.

Our success and future growth depends to a significant degree on
the skills and continued services of our key technical, sales
and management personnel. In particular, we are highly dependent
on the services of our Chief Executive Officer, David Flynn. All
of our employees work for us on an at-will basis, and we could
experience difficulty in retaining members of our senior
management team. We do not have key person life
insurance policies that cover any of our officers or other key
employees, other than our Chief Executive Officer. The loss of
the services of any of our key employees could disrupt our
operations, delay the development and introduction of our
products, and negatively impact our business, prospects and
operating results.

We plan to hire additional personnel in all areas of our
business, particularly for sales and research and development.
Competition for these types of personnel is intense. We cannot
assure you that we will be able to successfully attract or
retain qualified personnel. Our inability to retain and attract
the necessary personnel could adversely affect our business,
operating results and financial condition.

Our current
research and development efforts may not produce successful
products that result in significant revenue in the near future,
if at all.

Developing our products and related enhancements is expensive.
Our investments in research and development may not result in
marketable products or may result in products that are more
expensive than anticipated, take longer to generate revenue or
generate less revenue, than we anticipate. Our future plans
include significant investments in research and development and
related product opportunities. We believe that we must continue
to dedicate a significant amount of resources to our research
and development efforts to maintain our competitive position.
However, we may not receive significant revenue from these
investments in the near future, if at all, which could adversely
affect our business and operating results.

Our ability to
sell our products is dependent in part on ease of use and the
quality of our support offerings, and any failure to offer
high-quality technical support would harm our business,
operating results and financial condition.

Although our products are designed to be interoperable with
existing servers and systems, we may need to provide customized
installation and configuration support to our customers before
our products become fully operational in their environments.
Once our products are deployed within our customers
datacenters, they depend on our support organization to resolve
any technical issues relating to our products. Our ability to
provide effective support is largely dependent on our ability to
attract, train and retain qualified personnel. In addition, our
sales process is highly dependent on our product and business
reputation and on strong recommendations from our existing
customers. Any failure to maintain high-quality installation and
technical support, or a market perception that we do not
maintain high-quality support, could harm our reputation,
adversely affect our ability to sell our products to existing
and prospective customers, and could harm our business,
operating results and financial condition.

If we fail to
successfully maintain or grow our reseller and other channel
partner relationships, our business and operating results could
be adversely affected.

Our ability to maintain or grow our revenue will depend, in
part, on our ability to maintain our arrangements with our
existing channel partners and to establish and expand
arrangements with new channel partners. Our channel partners may
choose to discontinue offering our products or may not devote
sufficient attention and resources toward selling our products.
For example, our competitors may provide incentives to our
existing and potential channel partners to use or purchase their

products and services or to prevent or reduce sales of our
products. The occurrence of any of these events could adversely
affect our business and operating results.

We are exposed
to the credit risk of some of our customers and to credit
exposure in weakened markets, which could result in material
losses.

Most of our sales are on an open credit basis. As a general
matter, we monitor individual customer payment capability in
granting open credit arrangements and may limit these open
credit arrangements based on creditworthiness. We also maintain
reserves we believe are adequate to cover exposure for doubtful
accounts. Although we have programs in place that are designed
to monitor and mitigate these risks, we cannot assure you these
programs will be effective in reducing our credit risks,
especially as we expand our business internationally. If we are
unable to adequately control these risks, our business,
operating results and financial condition could be harmed.

We rely on contract manufacturers, AlphaEMS Manufacturing
Corporation and Jabil Circuit, Inc., to manufacture our
products. We currently do not have any long-term manufacturing
contracts with these contract manufacturers. Our reliance on
these contract manufacturers reduces our control over the
assembly process, exposing us to risks, including reduced
control over quality assurance, production costs and product
supply. If we fail to manage our relationship with these
contract manufacturers effectively, or if these contract
manufacturers experience delays, disruptions, capacity
constraints or quality control problems in their operations, our
ability to ship products to our customers could be impaired and
our competitive position and reputation could be harmed. If we
are required to change contract manufacturers or assume internal
manufacturing operations, we may lose revenue, incur increased
costs and damage our customer relationships. Qualifying a new
contract manufacturer and commencing production is expensive and
time-consuming. We may need to increase our component purchases,
contract manufacturing capacity, and internal test and quality
functions if we experience increased demand. The inability of
these contract manufacturers to provide us with adequate
supplies of high-quality products, could cause a delay in our
order fulfillment, and our business, operating results and
financial condition would be adversely affected.

We rely on a
limited number of suppliers, and in some cases single-source
suppliers, and any disruption or termination of these supply
arrangements could delay shipments of our products and could
materially and adversely affect our relationships with current
and prospective customers.

We rely on a limited number of suppliers, and in some cases
single-source suppliers, for several key components of our
products, and we have not entered into agreements for the
long-term purchase of these components. This reliance on a
limited number of suppliers and the lack of any guaranteed
sources of supply exposes us to several risks, including:



the inability to obtain an adequate supply of key components,
including non-volatile memory and reprogrammable controllers;



price volatility for the components of our products;



failure of a supplier to meet our quality, yield or production
requirements;



failure of a key supplier to remain in business or adjust to
market conditions; and



consolidation among suppliers, resulting in some suppliers
exiting the industry or discontinuing the manufacture of
components.

As a result of these risks, we cannot assure you that we will be
able to obtain enough of these key components in the future or
that the cost of these components will not increase. If our
supply of certain components is disrupted, our lead times are
extended or the cost of our components increases our business,
operating results and financial condition could be materially
adversely affected. If we are successful in growing our
business, we may not be able to continue to procure components
at current prices, which would require us to enter into longer
term contracts with component suppliers to obtain these
components at competitive prices. This could increase our costs
and decrease our gross margins, harming our operating results.

To the extent
we do not purchase sufficient inventory in connection with
discontinuations by our vendors of components used in our
products, our business or operating results may be adversely
affected.

It is common in the storage and networking industries for
component vendors to discontinue the manufacture of certain
types of components from time to time due to evolving
technologies and changes in the market. A suppliers
discontinuation of a particular type of component, such as a
specific size of NAND Flash memory, may require us to make
significant last time purchases of component
inventory that is being discontinued by the vendor to ensure
supply continuity until the transition to products based on next
generation components or until we are able to secure an
alternative supply. To the extent that we do not purchase
sufficient inventory in connection with these discontinuations,
we may experience delayed shipments, order cancellations or
otherwise purchase more expensive components to meet customer
demand, which could result in reduced gross margins.

If we fail to
remediate deficiencies in our control environment or are unable
to implement and maintain effective internal control over
financial reporting in the future, the accuracy and timeliness
of our financial reporting may be adversely
affected.

In connection with the audit of our consolidated financial
statements for fiscal 2008, 2009 and 2010, our independent
registered public accounting firm noted certain material
weaknesses in our internal control over financial reporting. A
material weakness is defined by the standards issued by the
Public Company Accounting Oversight Board as a deficiency, or
combination of deficiencies, in internal control, such that
there is a reasonable possibility that a material misstatement
of the entitys financial statements will not be prevented,
or detected and corrected on a timely basis.

For fiscal 2008 and 2009, our independent registered public
accounting firm noted a material weakness related to our
financial statement close process that resulted in the recording
of a substantial number of audit adjustments over the two fiscal
years ended June 30, 2009. This was primarily the result of
the early stage of our business and the lack of a sufficient
number of accounting personnel, including personnel with
technical accounting and financial reporting experience.

For fiscal 2010, our independent registered public accounting
firm noted a material weakness related to our financial
statement close process that resulted in audit adjustments. This
was a result of the lack of a sufficient number of accounting
personnel and a lack of formal accounting policies and
procedures related to identification of unique contract terms
that affected revenue recognition, proper identification and
accounting for inventory in transit and evaluation units and the
recording of certain expenses in the proper period.

Although we implemented a remediation plan and hired additional
financial staff, we cannot assure you that these remediation
steps have been effective or that these or other similar issues
will not arise in future periods.

We will need
to achieve and maintain effective internal control over
financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act and the failure to do so could have a
material adverse effect on our business and stock
price.

The Sarbanes-Oxley Act requires, among other things, that we
maintain effective internal control over financial reporting and
disclosure controls and procedures. In particular, commencing in
fiscal 2012, we must perform system and process evaluation and
testing of our internal control over financial reporting to
allow management and our independent registered public
accounting firm to report on the effectiveness of our internal
control over financial reporting, as required by
Section 404 of the Sarbanes-Oxley Act, or Section 404.
Our compliance with Section 404 will require that we incur
substantial accounting expense and expend significant management
efforts. If we are unable to comply with the requirements of
Section 404 in a timely manner, or if we or our independent
registered public accounting firm continues to note or identify
deficiencies in our internal control over financial reporting
that are deemed to be material weaknesses, the market price of
our stock could decline and we could be subject to sanctions or
investigations by the New York Stock Exchange, the Securities
and Exchange Commission, or the SEC, or other regulatory
authorities, which would require additional financial and
management resources.

If a third
party asserts that we are infringing its intellectual property,
whether successful or not, it could subject us to costly and
time-consuming litigation or expensive licenses, and our
business could be harmed.

The storage and networking industries are characterized by the
existence of a large number of patents, copyrights, trademarks
and trade secrets and by frequent litigation based on
allegations of infringement or other violations of intellectual
property rights. As we expand our presence in the market and
face increasing competition, the possibility of intellectual
property infringement claims against us grows. Our products may
not be able to withstand any third-party claims against their
use. We currently have a number of agreements in effect pursuant
to which we have agreed to defend, indemnify and hold harmless
our customers, suppliers and channel partners from damages and
costs which may arise from the infringement by our products of
third-party patents, trademarks or other proprietary rights. The
scope of these indemnity obligations varies, but may, in some
instances, include indemnification for damages and expenses,
including attorneys fees. Our insurance may not cover
intellectual property infringement claims. A claim that our
products infringe a third partys intellectual property
rights, if any, could harm our relationships with our customers,
may deter future customers from purchasing our products and
could expose us to costly litigation and settlement expenses.
Even if we are not a party to any litigation between a customer
and a third party relating to infringement by our products, an
adverse outcome in any such litigation could make it more
difficult for us to defend our products against intellectual
property infringement claims in any subsequent litigation in
which we are a named party. Any of these results could harm our
brand and operating results.

Any intellectual property rights claim against us or our
customers, suppliers and channel partners, with or without
merit, could be time-consuming, expensive to litigate or settle
and could divert management resources and attention. Further, a
party making such a claim, if successful, could secure a
judgment that requires us to pay substantial damages. An adverse
determination also could prevent us from offering our products
to our customers and may require that we procure or develop
substitute products that do not infringe, which could require
significant effort and expense. We may have to seek a license
for the technology, which may not be available on reasonable
terms or at all, may significantly increase our operating
expenses or require us to restrict our business activities in
one or more respects. Any of these events could seriously harm
our business, operating results and financial condition.

The success of
our business depends in part on our ability to protect and
enforce our intellectual property rights.

We rely on a combination of patent, copyright, service mark,
trademark, and trade secret laws, as well as confidentiality
procedures and contractual restrictions, to establish and
protect our proprietary rights, all of which provide only
limited protection. As of February 28, 2011, we had 3
issued patents and 59 patent applications in the United States
and 84 corresponding patent applications in foreign
countries. We cannot assure you that any patents will issue with
respect to our currently pending patent applications in a manner
that gives us the protection that we seek, if at all, or that
any patents issued to us will not be challenged, invalidated or
circumvented. Our currently issued patents and any patents that
may issue in the future with respect to pending or future patent
applications may not provide sufficiently broad protection or
they may not prove to be enforceable in actions against alleged
infringers. We cannot be certain that the steps we have taken
will prevent unauthorized use of our technology or the reverse
engineering of our technology. Moreover, others may
independently develop technologies that are competitive to ours
or infringe our intellectual property.

Protecting against the unauthorized use of our intellectual
property, products and other proprietary rights is expensive and
difficult. Litigation may be necessary in the future to enforce
or defend our intellectual property rights or to determine the
validity and scope of the proprietary rights of others. Any such
litigation could result in substantial costs and diversion of
management resources, either of which could harm our business,
operating results and financial condition. Further, many of our
current and potential competitors have the ability to dedicate
substantially greater resources to defending intellectual
property infringement claims and to enforcing their intellectual
property rights than we have. Accordingly, we may not be able to
prevent third parties from infringing upon or misappropriating
our intellectual property. Effective patent, trademark, service
mark, copyright and trade secret protection may not be available
in every country in which our products are available. An
inability to adequately protect and enforce our intellectual
property and other proprietary rights could seriously harm our
business, operating results and financial condition.

Our use of
open source and third-party technology could impose limitations
on our ability to commercialize our software.

We use open source software in our products. Although we monitor
our use of open source software closely, the terms of many open
source licenses have not been interpreted by U.S. courts,
and there is a risk that such licenses could be construed in a
manner that imposes unanticipated conditions or restrictions on
our ability to market our products. In such event, we could be
required to seek licenses from third parties in order to
continue offering our products for certain uses, to license
portions of our source code at no charge, to re-engineer our
technology or to discontinue offering some of our software in
the event re-engineering cannot be accomplished on a timely
basis, any of which could adversely affect our business,
operating results and financial condition.

We might
require additional capital to support business growth, and this
capital might not be available on acceptable terms, or at
all.

We intend to continue to make investments to support our
business growth and may require additional funds to respond to
business challenges, including the need to develop new products
or enhance our existing products, enhance our operating
infrastructure and acquire complementary businesses and
technologies. Accordingly, we may need to engage in equity or
debt financings to secure additional funds. If we raise
additional funds through further issuances of equity or
convertible debt securities, our stockholders could suffer
significant dilution, and any new equity securities we issue
could have rights, preferences and privileges superior to those
of holders of our common stock. Any debt financing in the future
could involve additional restrictive covenants relating to our
capital raising activities and other financial and operational
matters, which may make it more difficult for us to obtain
additional capital and to pursue business opportunities,
including potential acquisitions. We may not be able to obtain
additional financing on terms favorable to us, if at all. If we
are unable to

obtain adequate financing or financing on terms satisfactory to
us, when we require it, our ability to continue to support our
business growth and to respond to business challenges could be
significantly limited, and our business, operating results,
financial condition and prospects could be adversely affected.

We may expand
through acquisitions of, or investments in, other companies,
each of which may divert our managements attention,
resulting in additional dilution to our stockholders and
consumption of resources that are necessary to sustain and grow
our business.

Our business strategy may, from time to time, include acquiring
complementary products, technologies or businesses. We also may
enter into relationships with other businesses in order to
expand our product offerings, which could involve preferred or
exclusive licenses, additional channels of distribution or
discount pricing or investments in other companies. Negotiating
these transactions can be time-consuming, difficult and
expensive, and our ability to close these transactions may be
subject to third-party approvals, such as government regulation,
which are beyond our control. Consequently, we can make no
assurance that these transactions, once undertaken and
announced, will close.

An acquisition or investment may result in unforeseen operating
difficulties and expenditures. In particular, we may encounter
difficulties assimilating or integrating the businesses,
technologies, products, personnel or operations of the acquired
companies, particularly if the key personnel of the acquired
business choose not to work for us, and we may have difficulty
retaining the customers of any acquired business. Acquisitions
may also disrupt our ongoing business, divert our resources and
require significant management attention that would otherwise be
available for development of our business. Any acquisition or
investment could expose us to unknown liabilities. Moreover, we
cannot assure you that the anticipated benefits of any
acquisition or investment would be realized or that we would not
be exposed to unknown liabilities. In connection with these
types of transactions, we may issue additional equity securities
that would dilute our stockholders, use cash that we may need in
the future to operate our business, incur debt on terms
unfavorable to us or that we are unable to repay, incur large
charges or substantial liabilities, encounter difficulties
integrating diverse business cultures, and become subject to
adverse tax consequences, substantial depreciation or deferred
compensation charges. These challenges related to acquisitions
or investments could adversely affect our business, operating
results and financial condition.

Because our
long-term success depends, in part, on our ability to expand the
sales of our products to customers located outside of the United
States, our business will be susceptible to risks associated
with international operations.

While we currently maintain limited operations outside of the
United States, we intend to expand these operations in the
future. We have limited experience operating in foreign
jurisdictions. Our inexperience in operating our business
outside of the United States increases the risk that any
international expansion efforts that we may undertake will not
be successful. In addition, conducting and expanding
international operations subjects us to new risks that we have
not generally faced in the United States. These include:
exposure to foreign currency exchange rate risk; difficulties in
managing and staffing international operations; the increased
travel, infrastructure and legal compliance costs associated
with multiple international locations; potentially adverse tax
consequences; the burdens of complying with a wide variety of
foreign laws, including trade barriers, and different legal
standards; increased financial accounting and reporting burdens
and complexities; political, social and economic instability
abroad, terrorist attacks and security concerns in general; and
reduced or varied protection for intellectual property rights in
some countries. The occurrence of any one of these risks could
negatively affect our international business and, consequently,
our business, operating results and financial condition
generally.

Our operations and performance depend in part on worldwide
economic conditions and the impact these conditions have on
levels of spending on datacenter technology. Our business
depends on the overall demand for datacenter infrastructure and
on the economic health of our current and prospective customers.
Weak economic conditions, or a reduction in datacenter spending,
would likely adversely impact our business, operating results
and financial condition in a number of ways, including by
reducing sales, lengthening sales cycles and lowering prices for
our products and services.

The U.S. and various foreign governments have imposed controls,
export license requirements, and restrictions on the import or
export of some technologies, especially encryption technology.
In addition, from time to time, governmental agencies have
proposed additional regulation of encryption technology, such as
requiring the escrow and governmental recovery of private
encryption keys. Governmental regulation of encryption
technology and regulation of imports or exports, or our failure
to obtain required import or export approval for our products,
could harm our international and domestic sales and adversely
affect our revenue. In addition, failure to comply with such
regulations could result in penalties, costs, and restrictions
on export privileges, which would harm our operating results.

The terms of
our loan and security agreement with a financial institution may
restrict our ability to engage in certain
transactions.

Pursuant to the current terms of our loan and security agreement
with a financial institution, we are subject to financial
covenants and cannot engage in certain transactions, including
disposing of certain assets, incurring additional indebtedness,
declaring dividends, acquiring or merging with another entity or
leasing additional real property unless certain conditions are
met or unless we receive prior approval from the financial
institution. The loan and security agreement further limits our
ability to make material changes to our management team or enter
into transactions with affiliates. If the financial institution
does not consent to any of these actions or if we are unable to
comply with these covenants, we could be prohibited from
engaging in transactions which could be beneficial to our
business and our stockholders.

Our business
is subject to the risks of earthquakes and other natural
catastrophic events, and to interruption by man-made problems
such as computer viruses or terrorism.

Our sales headquarters and our current contract manufacturers
are located in the San Francisco Bay area, which has a
heightened risk of earthquakes. We may not have adequate
business interruption insurance to compensate us for losses that
may occur from a significant natural disaster, such as an
earthquake, which could have a material adverse impact on our
business, operating results and financial condition. In
addition, acts of terrorism or malicious computer viruses could
cause disruptions in our or our customers businesses or
the economy as a whole. To the extent that these disruptions
result in delays or cancellations of customer orders or the
deployment of our products, our business, operating results and
financial condition would be adversely affected.

Failure to
comply with governmental laws and regulations could harm our
business.

Our business is subject to regulation by various federal, state,
local and foreign governmental agencies, including agencies
responsible for monitoring and enforcing employment and labor
laws, workplace safety, product safety, environmental laws,
consumer protection laws, anti-bribery laws, import/export
controls, federal securities laws and tax laws and regulations.
In certain jurisdictions, these regulatory requirements may be
more stringent than in the United States. Noncompliance with

applicable regulations or requirements could subject us to
investigations, sanctions, mandatory product recalls,
enforcement actions, disgorgement of profits, fines, damages,
civil and criminal penalties or injunctions. If any governmental
sanctions are imposed, or if we do not prevail in any possible
civil or criminal litigation, our business, operating results
and financial condition could be materially adversely affected.
In addition, responding to any action will likely result in a
significant diversion of managements attention and
resources and an increase in professional fees. Enforcement
actions and sanctions could harm our business, operating results
and financial condition.

Risks Related to
this Offering, the Securities Markets and Ownership of Our
Common Stock

We cannot
assure you that a market will develop for our common stock or
what the market price of our common stock will be.

Before this offering, there was no public trading market for our
common stock, and we cannot assure you that one will develop or
be sustained after this offering. If a market does not develop
or is not sustained, it may be difficult for you to sell your
shares of common stock at an attractive price or at all. We
cannot predict the prices at which our common stock will trade.
The initial public offering price of our common stock will be
determined by negotiations with the underwriters and may not
bear any relationship to the market price at which our common
stock will trade after this offering or to any other established
criteria of the value of our business.

The price of
our common stock may be volatile and the value of your
investment could decline.

Technology stocks have historically experienced high levels of
volatility. The trading price of our common stock following this
offering may fluctuate substantially. The price of our common
stock that will prevail in the market after this offering may be
higher or lower than the price you pay, depending on many
factors, some of which are beyond our control and may not be
related to our operating performance. These fluctuations could
cause you to lose all or part of your investment in our common
stock. Factors that could cause fluctuations in the trading
price of our common stock include the following:



price and volume fluctuations in the overall stock market from
time to time;



significant volatility in the market price and trading volume of
technology companies in general, and of companies in our
industry;



actual or anticipated changes in our results of operations or
fluctuations in our operating results;

actual or anticipated changes in the expectations of investors
or securities analysts;



actual or anticipated developments in our competitors
businesses or the competitive landscape generally;



litigation involving us, our industry or both;



regulatory developments in the United States, foreign countries
or both;



general economic conditions and trends;



major catastrophic events;



sales of large blocks of our stock; or



departures of key personnel.

In addition, if the market for technology stocks or the stock
market in general experiences loss of investor confidence, the
trading price of our common stock could decline for reasons
unrelated to our

business, operating results or financial condition. The trading
price of our common stock might also decline in reaction to
events that affect other companies in our industry even if these
events do not directly affect us. In the past, following periods
of volatility in the market price of a companys
securities, securities class action litigation has often been
brought against that company. If our stock price is volatile, we
may become the target of securities litigation. Securities
litigation could result in substantial costs and divert our
managements attention and resources from our business.
This could have a material adverse effect on our business,
operating results and financial condition.

Sales of
outstanding shares of our common stock into the market in the
future could cause the market price of our common stock to drop
significantly, even if our business is doing well.

If our existing stockholders sell, or indicate an intent to
sell, substantial amounts of our common stock in the public
market after the contractual
lock-up and
other legal restrictions on resale lapse, the trading price of
our common stock could decline. After this offering,
approximately shares
of common stock will be outstanding. Of these shares,
the shares
of our common stock to be sold in this offering will be freely
tradable, without restriction, in the public market.

Our directors, officers, employees and current stockholders are
subject to a
180-day
contractual
lock-up that
prevents them from selling their shares prior to the expiration
of this
lock-up
period. The
lock-up is
subject to extension under certain circumstances. Goldman, Sachs
& Co. and Morgan Stanley & Co. Incorporated may, in
their sole discretion, permit shares subject to this
lock-up to
be sold prior to its expiration. For additional information, see
Shares Eligible for Future Sale 
Lock-Up
Agreements.

At various times after the
lock-up
agreements pertaining to this offering expire, up to an
additional shares
will be eligible for sale in the public
market,
of which are held by directors, executive officers and other
affiliates and will be subject to volume limitations under
Rule 144 under the Securities Act of 1933, as amended, and
various vesting agreements.

The aggregate
of shares
underlying outstanding warrants and our equity incentive plans
and agreements that were outstanding as of December 31,
2010 will also become eligible for sale in the public market to
the extent permitted by the provisions of various option
agreements and warrants, the
lock-up
agreements and Rules 144 and 701 under the Securities Act.
If these additional shares are sold, or if it is perceived that
they will be sold, in the public market, the trading price of
our common stock could decline. For additional information, see
Shares Eligible for Future Sale.

If you
purchase shares of our common stock in this offering, you will
experience substantial and immediate dilution.

If you purchase shares of our common stock in this offering, you
will experience substantial and immediate dilution of
$ per share based on an assumed
initial public offering price of $
per share, which is the midpoint of the range as reflected on
the cover page of this prospectus, because the price that you
pay will be substantially greater than the net tangible book
value per share of the common stock that you acquire. This
dilution is due in large part to the fact that our earlier
investors paid substantially less than the initial public
offering price when they purchased their shares of our capital
stock. In addition, investors who purchase shares in this
offering will contribute
approximately % of the total amount
of equity capital raised by us through the date of this
offering, but will only own
approximately % of our outstanding
shares. In addition, we have issued options and warrants to
acquire common stock at prices significantly below the assumed
initial public offering price. To the extent outstanding options
and warrants are ultimately exercised, there will be further
dilution to investors in this offering.

If securities
analysts do not publish research or reports about our business,
or if they downgrade our stock, the price of our stock could
decline.

The trading market for our common stock could be influenced by
any research and reports that securities or industry analysts
publish about us or our business. We do not currently have and
may never obtain research coverage by securities and industry
analysts. If no securities or industry analysts commence
coverage of our company, the trading price for our stock would
be negatively impacted. In the event securities or industry
analysts cover our company and one or more of these analysts
downgrade our stock or publish inaccurate or unfavorable
research about our business, our stock price would likely
decline. If one or more of these analysts cease coverage of our
company or fail to publish reports on us regularly, demand for
our stock could decrease, which could cause our stock price and
trading volume to decline.

Insiders will
continue to have substantial control over us after this
offering, which could limit your ability to influence the
outcome of key transactions, including a change of
control.

Our directors, executive officers and each of our stockholders
who own greater than 5% of our outstanding common stock and
their affiliates, in the aggregate, will beneficially own
approximately % of the outstanding
shares of our common stock after this offering. As a result,
these stockholders, if acting together, will be able to
influence or control matters requiring approval by our
stockholders, including the election of directors and the
approval of mergers, acquisitions or other extraordinary
transactions. They may also have interests that differ from
yours and may vote in a way with which you disagree and which
may be adverse to your interests. This concentration of
ownership may have the effect of delaying, preventing or
deterring a change of control of our company, could deprive our
stockholders of an opportunity to receive a premium for their
common stock as part of a sale of our company and might
ultimately affect the market price of our common stock.

We have broad
discretion in the use of the net proceeds that we receive in
this offering.

The principal purposes of this offering are to raise additional
capital, to create a public market for our common stock and to
facilitate our future access to the public equity markets. We
have not yet determined the specific allocation of the net
proceeds that we receive in this offering. Rather, we intend to
use the net proceeds that we receive in this offering for
working capital and general corporate purposes, including
expansion of our sales organization, further development and
expansion of our product offerings and possible acquisitions of,
or investments in, businesses, technologies or other assets.
Accordingly, our management will have broad discretion over the
specific use of the net proceeds of this offering and might not
be able to obtain a significant return, if any, on investment of
these net proceeds. Investors in this offering will need to rely
upon the judgment of our management with respect to the use of
proceeds. If we do not use the net proceeds from this offering
effectively, our business, operating results and financial
condition could be harmed.

We do not
intend to pay dividends for the foreseeable
future.

We have never declared or paid any dividends on our common
stock. In addition, our credit facility with a financial
institution restricts our ability to pay dividends. We intend to
retain any earnings to finance the operation and expansion of
our business, and we do not anticipate paying any cash dividends
in the future. As a result, you may only receive a return on
your investment in our common stock if the market price of our
common stock increases.

We will incur
increased costs as a result of being a public
company.

As a public company, we will incur significant legal, accounting
and other expenses that we did not incur as a private company.
In addition, new rules implemented by the SEC and the New York
Stock Exchange, require changes in corporate governance
practices of public companies. We expect these rules and
regulations to increase our legal and financial compliance costs
and to make some

activities more time-consuming and costly. We will also incur
additional costs associated with our public company reporting
requirements. We expect these rules and regulations to make it
more difficult and more expensive for us to obtain director and
officer liability insurance, and we may be required to accept
reduced policy limits and coverage or incur substantially higher
costs to obtain the same or similar coverage. As a result, it
may be more difficult for us to attract and retain qualified
people to serve on our board of directors or as executive
officers.

Provisions in
our certificate of incorporation and bylaws and under Delaware
law might discourage, delay or prevent a change of control of
our company or changes in our management and, therefore, depress
the trading price of our common stock.

Our certificate of incorporation and bylaws contain provisions
that could depress the trading price of our common stock by
acting to discourage, delay or prevent a change of control of
our company or changes in our management that the stockholders
of our company may deem advantageous. These provisions:



establish a classified board of directors so that not all
members of our board of directors are elected at one time;



authorize the issuance of blank check preferred
stock that our board of directors could issue to increase the
number of outstanding shares to discourage a takeover attempt;



prohibit stockholder action by written consent, which requires
all stockholder actions to be taken at a meeting of our
stockholders;



prohibit stockholders from calling a special meeting of our
stockholders;



provide that the board of directors is expressly authorized to
make, alter or repeal our bylaws; and



establish advance notice requirements for nominations for
elections to our board of directors or for proposing matters
that can be acted upon by stockholders at stockholder meetings.

Additionally, we are subject to Section 203 of the Delaware
General Corporation Law, which generally prohibits a Delaware
corporation from engaging in any of a broad range of business
combinations with any interested stockholder for a
period of three years following the date on which the
stockholder became an interested stockholder and
which may discourage, delay or prevent a change of control of
our company.

Any provision of our certificate of incorporation or bylaws or
Delaware law that has the effect of delaying or deterring a
change in control could limit the opportunity for our
stockholders to receive a premium for their shares of our common
stock, and could also affect the price that some investors are
willing to pay for our common stock.

These forward-looking statements include, but are not limited
to, statements concerning the following: our ability to achieve
or maintain profitability; our business plan and growth
management; our operating expenses; our business expansion,
including expansion of our sales and research and development
capabilities; certain critical accounting policies and
estimates; our ability to remediate previously identified
material weaknesses; our competitors and our ability to
compete effectively in the market; the ability of our platform
to address industry problems; the data supply problem; our
ability to innovate new products and bring them to market in a
timely manner; our ability to expand internationally; the impact
of quarterly fluctuations of revenue and operating results; the
compliance costs of being a public company; our expectations
concerning relationships with third parties, including channel
partners, key customers and OEMs; levels and sources of revenue;
our estimates regarding market size, market position, and market
opportunity; levels of capital expenditures; future capital
requirements and availability to fund operations and growth; the
adequacy of our facilities; future headcount needs; future
acquisitions of or investments in complementary companies,
products, services or technologies; the adequacy of our
intellectual property; and the sufficiency of our issued patents
and patent applications to protect our intellectual property.

These forward-looking statements are subject to a number of
risks, uncertainties and assumptions, including those described
in Risk Factors. Moreover, we operate in a
competitive and rapidly changing environment, and new risks
emerge from time to time. It is not possible for our management
to predict all risks, nor can we assess the impact of all
factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking
statements we may make. In light of these risks, uncertainties
and assumptions, the forward-looking events and circumstances
discussed in this prospectus may not occur and actual results
could differ materially and adversely from those anticipated or
implied in the forward-looking statements.

You should not rely upon forward-looking statements as
predictions of future events. Although we believe that the
expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee that the future results, levels
of activity, performance or events and circumstances reflected
in the forward-looking statements will be achieved or occur.
Moreover, neither we nor any other person assumes responsibility
for the accuracy and completeness of the forward-looking
statements. We undertake no obligation to update publicly any
forward-looking statements for any reason after the date of this
prospectus to conform these statements to actual results or to
changes in our expectations, except as required by law.

You should read this prospectus and the documents that we
reference in this prospectus and have filed with the SEC as
exhibits to the registration statement of which this prospectus
is a part with the understanding that our actual future results,
levels of activity, performance and events and circumstances may
be materially different from what we expect.

Unless otherwise indicated, information contained in this
prospectus concerning our industry and the markets in which we
operate, including our general expectations and market position,
market opportunity and market size, is based on information from
various sources, including International Data Corporation, or
IDC, IMS Research, or IMS, The TABB Group, Gartner, Inc. and the
U.S. Department of Energy, on assumptions that we have made
that are based on those data and other similar sources and on
our knowledge of the markets for our products. These data
involve a number of assumptions and limitations, and you are
cautioned not to give undue weight to such estimates. We have
not independently verified any third party information and
cannot assure you of its accuracy or completeness. While we
believe the market position, market opportunity and market size
information included in this prospectus is generally reliable,
such information is inherently imprecise. In addition,
projections, assumptions and estimates of our future performance
and the future performance of the industry in which we operate
is necessarily subject to a high degree of uncertainty and risk
due to a variety of factors, including those described in
Risk Factors and elsewhere in this prospectus. These
and other factors could cause results to differ materially from
those expressed in the estimates made by the independent parties
and by us.

The Gartner Report referred to in this prospectus represents
data, research opinion or viewpoints published, as part of a
syndicated subscription service, by Gartner, Inc., and are not
representations of fact. The Gartner Report speaks as of its
original publication date (and not as of the date of this
prospectus) and the opinions expressed in the Gartner Report are
subject to change without notice.

The superscript notations in this prospectus identify IDC data.
The source of the IDC data and our estimates based on such data,
if any, are provided below:

We estimate that we will receive net proceeds of approximately
$ million from our sale of
the shares
of common stock offered by us in this offering, based upon an
assumed initial public offering price of
$ per share, which is the midpoint
of the range reflected on the cover page of this prospectus, and
after deducting estimated underwriting discounts and commissions
and estimated offering expenses to be paid by us. If the
underwriters option to purchase additional shares is
exercised in full, we estimate that our net proceeds will be
approximately $ million,
assuming an initial public offering price of
$ per share, which is the midpoint
of the range reflected on the cover page of this prospectus.

Each $1.00 increase or decrease in the assumed initial public
offering price of $ per share,
which is the midpoint of the range reflected on the cover page
of this prospectus, would increase or decrease, as applicable,
the net proceeds to us by approximately
$ million, assuming that the
number of shares offered by us, as set forth on the cover page
of this prospectus, remains the same and after deducting the
estimated underwriting discounts and commissions and estimated
offering expenses to be paid by us.

We will not receive any proceeds from the sale of shares of
common stock by the selling stockholders if the
underwriters exercise their option to purchase additional
shares, although we will bear the costs, other than underwriting
discounts and commissions, associated with the sale of these
shares.

We currently intend to use the net proceeds to us from this
offering primarily for working capital and general corporate
purposes, including expansion of our sales and marketing
organizations, further development and expansion of our product
offerings and possible acquisitions of, or investments in,
businesses, technologies or other assets. We have no present
understandings, commitments or agreements to enter into any
acquisitions or investments.

Other principal purposes of this offering include creating a
public market for our common stock and increasing our visibility
in the market. A public market for our common stock will
facilitate future access to public equity markets and enhance
our ability to use common stock as a means of attracting and
retaining key employees and as consideration for acquisitions or
strategic transactions.

Our management will have broad discretion in the application of
the net proceeds of this offering, and investors will be relying
on the judgment of our management regarding the treatment of
these proceeds. Pending the uses described above, we plan to
invest the net proceeds that we receive in this offering in
short-term and intermediate-term interest-bearing obligations,
investment-grade investments, certificates of deposit or direct
or guaranteed obligations of the U.S. government.

We have never declared or paid any cash dividend on our capital
stock. We currently intend to retain any future earnings and do
not expect to pay any dividends in the foreseeable future. In
addition, the terms of our loan and security agreement with a
financial institution currently prohibits us from paying cash
dividends on our common stock. Any future determination to
declare cash dividends will be made at the discretion of our
board of directors, subject to applicable laws and compliance
with certain covenants under our loan and security agreement
with the financial institution, and will depend on our financial
condition, results of operations, capital requirements, general
business conditions and other factors that our board of
directors may deem relevant.

The following table sets forth our cash, cash equivalents and
short-term investments and capitalization as of
December 31, 2010 on:



an actual basis;



a pro forma basis, giving effect to (i) the automatic
conversion of all outstanding shares of our preferred stock into
shares of common stock upon completion of this offering and
(ii) the reclassification of the convertible preferred
stock warrant liability to additional paid-in capital; and



a pro forma as adjusted basis, giving effect to the pro forma
adjustments and the sale
of shares
of common stock by us in this offering, based on an assumed
initial public offering price of $
per share, the midpoint of the range reflected on the cover page
of this prospectus, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses to be
paid by us.

The pro forma as adjusted information set forth in the table
below is illustrative only and will be adjusted based on the
actual initial public offering price and other terms of this
offering determined at pricing.

You should read this table together with Managements
Discussion and Analysis of Financial Condition and Results of
Operations and our audited and unaudited consolidated
financial statements and the related notes that are included
elsewhere in this prospectus.

Each $1.00 increase or decrease in the assumed initial public
offering price of $ per share, the
midpoint of the range reflected on the cover page of this
prospectus, would increase or decrease, as applicable, our pro
forma as adjusted cash, cash equivalents and short-term
investments, additional paid-in capital, total
stockholders (deficit) equity and total capitalization by
approximately $ million,
assuming that the number of shares offered by us, as set forth
on the cover page of this prospectus, remains the same and after
deducting the estimated underwriting discounts and commissions
and estimated offering expenses to be paid by us.

The number of shares of our common stock set forth in the table
excludes:



21,938,786 shares of common stock issuable upon the
exercise of options outstanding as of December 31, 2010,
with a weighted-average exercise price of $1.11 per share;



4,898,550 shares of common stock issuable upon the exercise
of options granted between January 1, 2011 and
February 28, 2011 at an exercise price of $5.12 per share;



60,000 shares of common stock issued in February 2011;



12,500 shares of common stock issuable upon the exercise of
an outstanding warrant to purchase common stock, with an
exercise price of $1.96 per share;



125,800 shares of common stock issuable upon the exercise
of an outstanding warrant to purchase convertible preferred
stock, at an exercise price of $1.093 per share, which will be
exercisable for an equivalent number of shares of common stock
following this offering; and



unallocated shares of common stock reserved for future issuance
under our stock-based compensation plans, consisting of
6,050,466 shares of common stock reserved for future
issuance under our 2010 Executive Stock Incentive Plan or our
2008 Stock Incentive Plan (including the options to purchase
shares of common stock granted between January 1, 2011 and
February 28,
2011),
shares of common stock reserved for future issuance under our
2011 Equity Stock Incentive Plan, which will become effective in
connection with this offering,
and shares
of common stock reserved for future issuance under our 2011
Employee Stock Purchase Plan, which will become effective in
connection with this offering.

If you invest in our common stock in this offering, your
interest will be diluted to the extent of the difference between
the initial public offering price per share of our common stock
and the pro forma net tangible book value per share of our
common stock after this offering.

As of December 31, 2010, our pro forma net tangible book
value was approximately $32.9 million, or $0.49 per share
of common stock. Our pro forma net tangible book value per share
represents the amount of our total tangible assets reduced by
the amount of our total liabilities and divided by the total
number of shares of our common stock outstanding as of
December 31, 2010, assuming conversion of all outstanding
shares of convertible preferred stock into common stock.

After giving effect to our sale in this offering
of shares
of our common stock, at the assumed initial public offering
price of $ per share, which is the
midpoint of the range reflected on the cover page of this
prospectus, after deducting estimated underwriting discounts and
commissions and estimated offering expenses to be paid by us,
our pro forma net tangible book value as of December 31,
2010 would have been approximately
$ million, or
$ per share of our common stock.
This represents an immediate increase in pro forma net tangible
book value of $ per share to our
existing stockholders and an immediate dilution of
$ per share to investors
purchasing shares in this offering.

The following table illustrates this dilution:

Assumed initial public offering price per share

$

Pro forma net tangible book value per share as of
December 31, 2010

$

0.49

Pro forma net tangible book value per share as of
December 31, 2010, before giving effect to this offering

Increase per share attributable to this offering

Pro forma net tangible book value, as adjusted to give effect to
this offering

$

Dilution in pro forma net tangible book value per share to new
investors in this offering

$

A $1.00 increase or decrease in the assumed initial public
offering price of $ per share,
which is the midpoint of the range reflected on the cover page
of this prospectus, would increase or decrease our pro forma net
tangible book value, as adjusted to give effect to this
offering, by $ per share, the
increase or decrease per share attributable to this offering by
$ per share and the dilution in
pro forma as adjusted net tangible book value per share to new
investors in this offering by $
per share, assuming the number of shares offered by us, as set
forth on the cover page of this prospectus, remains the
same and after deducting estimated underwriting discounts and
commissions and estimated expenses to be paid by us.

If the underwriters exercise their option to purchase additional
shares in full, the pro forma net tangible book value per share
of our common stock after giving effect to this offering would
be $ per share, and the dilution
in net tangible book value per share to investors in this
offering would be $ per share.

The following table summarizes, on a pro forma as adjusted basis
as of December 31, 2010 after giving effect to the
conversion of our convertible preferred stock into common stock
and this offering on an assumed initial public offering price of
$ per share, which is the midpoint
of the range reflected on the cover page of this prospectus, the
difference between existing stockholders and new investors with
respect to the number of shares of common stock purchased from
us, the total

cash consideration paid to us and the average price per share
paid, before deducting estimated underwriting discounts and
commissions and estimated offering expenses:

Shares Purchased

Total Consideration

Average Price

Number

Percent

Amount

Percent

Per Share

Existing stockholders

%

$

%

$

New public investors

Total

100.0

%

$

100.0

%

A $1.00 increase or decrease in the assumed initial public
offering price of $ per share,
which is the midpoint of the range reflected on the cover page
of this prospectus, would increase or decrease, respectively,
total consideration paid by new investors and total
consideration paid by all stockholders by approximately
$ million, assuming that the
number of shares offered by us, as set forth on the cover page
of this prospectus, remains the same and after deducting the
estimated underwriting discounts and commissions and estimated
offering expenses to be paid by us.

To the extent that any outstanding options are exercised, new
investors will experience further dilution.

Except as otherwise indicated, the above discussion and tables
assume no exercise of the underwriters option to purchase
additional shares. If the underwriters exercise their option to
purchase additional shares in full from us and the selling
stockholders, our existing stockholders would
own % and our new investors would
own % of the total number of shares
of our common stock outstanding upon the completion of this
offering.

The consolidated statements of operations data presented below
for the fiscal years ended June 30, 2008, 2009 and 2010 and
the consolidated balance sheet data as of June 30, 2009 and
2010 are derived from our audited consolidated financial
statements, which are included in this prospectus. The
consolidated balance sheet data as of June 30, 2008 are
derived from audited consolidated financial statements not
included in this prospectus. The consolidated statements of
operations for the period from December 23, 2005
(Inception) to June 30, 2006 and for the fiscal year ended
June 30, 2007 and the consolidated balance sheet data as of
June 30, 2006 and 2007 are derived from unaudited
consolidated financial statements that are not included in this
prospectus. The consolidated statements of operations data for
the six months ended December 31, 2009 and 2010 and the
consolidated balance sheet data as of December 31, 2010 are
derived from our unaudited consolidated financial statements
that are included elsewhere in this prospectus. The unaudited
consolidated financial statements were prepared on a basis
consistent with our audited financial statements and include all
adjustments, consisting of normal and recurring adjustments that
we consider necessary for a fair presentation of the financial
position and results of operations as of and for such periods.
Operating results for the six months ended December 31,
2010 are not necessarily indicative of the results that may be
expected for the full fiscal year ending June 30, 2011. You
should read the following selected consolidated financial data
with Managements Discussion and Analysis of
Financial Condition and Results of Operations, our
consolidated financial statements and the notes to consolidated
financial statements, which are included in this prospectus.

You should read the following discussion together with our
consolidated financial statements and the related notes included
elsewhere in this prospectus. This discussion contains
forward-looking statements about our business and operations.
Our actual results may differ materially from those we currently
anticipate as a result of many factors, including those we
describe under Risk Factors and elsewhere in this
prospectus. Our fiscal year end is June 30 and our fiscal
quarters end on September 30, December 31,
March 31, and June 30. Our fiscal years ended
June 30, 2008, 2009 and 2010 and our fiscal year ending
June 30, 2011 are referred to as fiscal 2008, 2009, 2010
and 2011, respectively.

We were incorporated in December 2005, and we initially focused
on the engineering and development of our platform. We have
experienced significant growth over the past few years with
revenue of $0.6 million, $10.2 million,
$36.2 million and $58.3 million in fiscal years 2008,
2009 and 2010, and the six months ended December 31, 2010,
respectively. From December 31, 2009 to December 31,
2010, our headcount has increased from 183 to 348.

We sell our products through our global direct sales force,
OEMs, including Dell, HP and IBM, and other channel partners.
Some of our OEMs and channel partners integrate our platform
into their own proprietary product offerings. Our primary sales
office is located in San Jose, California, and we also have
a sales presence in the United Kingdom, Germany, Japan, Hong
Kong, Singapore, Australia and Canada.

Large purchases by a limited number of customers have accounted
for a substantial majority of our revenue, and the composition
of the group of our largest customers changes from period to
period. Many of our customers make concentrated purchases to
complete or upgrade specific large-scale data storage
installations. These concentrated purchases are short-term in
nature and are typically made on a purchase order basis rather
than pursuant to long-term contracts. During fiscal 2010 and the
six months ended December 31, 2010, sales to the 10 largest
customers in each period, including the applicable OEMs,
accounted for approximately 75% and 92% of revenue,
respectively. During fiscal 2010 and the six months ended
December 31, 2010, sales to two OEMs accounted for
approximately 23% and 32% of our revenue, respectively.
Facebook, Inc. is currently our largest customer and accounted
for a substantial portion of revenue during the six months ended
December 31, 2010. We expect revenue from sales to Facebook
and one other end-user to account for a substantial portion of
revenue for the three months ending March 31, 2011, but
that revenue from sales to Facebook and the other end-user will
decline significantly for the three months ending June 30,
2011 as they complete their planned deployments. As a result,
our quarterly revenue and operating results are likely to
fluctuate in the future and will be difficult to estimate. We
expect that sales to a limited number of customers will continue
to contribute materially to our revenue for the foreseeable
future.

We outsource the manufacturing of our hardware products to our
two primary contract manufacturers. We procure a majority of the
components used in our products directly from third-party
vendors and have them delivered to our contract manufacturers
for manufacturing and assembly. Once our products are assembled,
we perform quality assurance testing, labeling, final
configuration, including a final firmware installation, and
shipment to our customers.

As a consequence of the rapidly evolving nature of our business
and our limited operating history, we believe that
period-to-period
comparisons of revenue and other operating results, including

gross margin and operating expenses as a percentage of our
revenue, are not necessarily meaningful and should not be relied
upon as indications of future performance. Although we have
experienced significant percentage growth in our revenue, we do
not believe that our historical growth rates are likely to be
sustainable or indicative of future growth.

Components of
Consolidated Statements of Operations

Revenue

We derive revenue from the sale of our storage memory products
and support services. We sell our storage memory platform
through our direct sales force, OEMs and channel partners. We
provide our support services pursuant to support contracts,
which involve hardware support, software support and software
upgrades on a
when-and-if
available basis, and typically have a one-year term. Revenue
from support services represented less than $1.0 million
for fiscal 2010 and less than $1.1 million for the six
months ended December 31, 2010.

Cost of
Revenue

Cost of revenue consists primarily of inventory costs including
amounts paid to our suppliers and contract manufacturers for
hardware components and assembly of those components into our
products. The largest portion of our cost of revenue consists of
the cost of non-volatile memory components. Given the commodity
nature of memory components, neither we nor our contract
manufacturers enter into long-term supply contracts for our
product components, which can cause our cost of revenue to
fluctuate. Cost of revenue is recorded when the related product
revenue is recognized. Cost of revenue also includes costs of
shipping, personnel expenses related to customer support,
warranty reserves and carrying value adjustments recorded for
excess and obsolete inventory.

Operating
Expenses

The largest component of our operating expenses is personnel
costs, consisting of salaries, benefits and incentive
compensation for our employees, which includes stock-based
compensation. Our headcount increased from 86 as of
June 30, 2008 to 172 as of June 30, 2009, to 262 as of
June 30, 2010 and to 348 as of December 31, 2010. As a
result, operating expenses have increased significantly over
these periods. In December 2010, we entered into an agreement
terminating the lease for our prior corporate offices effective
as of April 30, 2011. The net book value of the related
leasehold improvements of $1.3 million as of
December 31, 2010 will be amortized on a straight-line
basis over the remaining lease term ending April 30, 2011.

Sales and
Marketing

Sales and marketing expenses consist primarily of personnel
costs, incentive compensation, marketing programs,
travel-related costs, consulting expenses associated with sales
and marketing activities, and facilities-related costs. We plan
to continue to invest heavily in sales by increasing our sales
headcount. Our sales personnel are typically not immediately
productive and therefore the increase in sales and marketing
expense we incur when we add new sales representatives is not
immediately offset by increased revenue and may not result in
increased revenue over the long-term. The timing of our hiring
of new sales personnel and the rate at which they generate
incremental revenue could therefore affect our future
period-to-period
financial performance. We expect that sales and marketing
expenses will continue to increase in absolute dollars as we
expect to continue hiring.

Research and
Development

Research and development expenses consist primarily of personnel
costs, prototype expenses, consulting services and depreciation
associated with research and development equipment. We expense
research and development costs as incurred. We expect to
continue to devote substantial

resources to the development of our products including the
development of new software products. We believe that these
investments are necessary to maintain and improve our
competitive position. We expect that our research and
development expenses will continue to increase in absolute
dollars as we continue to invest in additional engineering
personnel and infrastructure required to support the development
of new products and to enhance existing products.

General and
Administrative

General and administrative expenses consist primarily of
personnel costs, legal expenses, consulting and professional
services, audit costs, and facility-related expenses for our
executive, finance, human resources, information technology and
legal organizations. While we expect personnel costs to be the
primary component of general and administrative expenses, we
also expect to incur significant additional legal and accounting
costs after this offering related to compliance with rules and
regulations implemented by the SEC, as well as additional
insurance, investor relations and other costs associated with
being a public company.

Results of
Operations for the Six Months Ended December 31, 2009 and
2010

Revenue

The following table presents our revenue for the periods
indicated and related changes as compared to the prior period
(dollars in thousands):

Six Months

Ended December 31,

Change in

2009

2010

$

%

(unaudited)

Revenue

$

11,927

$

58,264

$

46,337

389%

Revenue increased $46.3 million from the six months ended
December 31, 2009 to the six months ended December 31,
2010, primarily due to an increase in the volume of products
shipped.

Revenue from our 10 largest customers, including the applicable
OEMs, was 69% and 92% of revenue for the six months ended
December 31, 2009 and December 31, 2010, respectively.
Facebook accounted for greater than 10% of revenue for the six
months ended December 31, 2009 and 2010. In addition, two
other customers each accounted for greater than 10% of revenue
for the six months ended December 31, 2009 and 2010.
Revenue from customers with a ship-to location in the United
States was 70% and 75% of revenue for the six months ended
December 31, 2009 and 2010, respectively. Revenue from
customers with a ship-to address in China was 14% of revenue for
the six months ended December 31, 2010.

Cost of
Revenue and Gross Margin

The following table presents our cost of revenue, gross profit
and gross margin for the periods indicated and related changes
as compared to the prior period (dollars in thousands):

Cost of revenue increased $23.5 million and gross profit
increased $22.8 million from the six months ended
December 31, 2009 to the six months ended December 31,
2010, primarily due to the increase in volume of product shipped
to one significant customer. Gross margin decreased due to a
higher concentration of lower gross margin sales to one
significant customer and our OEM customers.

Operating
Expenses

Sales and
Marketing

The following table presents our sales and marketing expenses
for the periods indicated and related changes as compared to the
prior period (dollars in thousands):

Six Months

Ended December 31,

Change in

2009

2010

$

%

(unaudited)

Sales and marketing

$

8,424

$

20,416

$

11,992

142%

Sales and marketing expenses increased $12.0 million from
the six months ended December 31, 2009 to the six months
ended December 31, 2010, primarily due to an increase in
the number of sales and marketing employees, from 78 as of
December 31, 2009 to 181 as of December 31, 2010. This
resulted in a $9.3 million increase in personnel-related
costs, including a $2.4 million increase in commission
expense. The increase was also due to a $1.0 million
increase in travel-related costs, a $0.9 million increase
in marketing program costs and a $0.2 million increase in
allocated rent and facilities expenses.

Research and
Development

The following table presents our research and development
expenses for the periods indicated and related changes as
compared to the prior period (dollars in thousands):

Six Months

Ended December 31,

Change in

2009

2010

$

%

(unaudited)

Research and development

$

7,336

$

10,541

$

3,205

44%

Research and development expenses increased $3.2 million
from the six months ended December 31, 2009 to the six
months ended December 31, 2010, primarily due to an
increase in the number of research and development employees,
from 78 as of December 31, 2009 to 114 as of
December 31, 2010. This resulted in a $2.1 million
increase in personnel-related costs. The increase was also due
to a $0.5 million increase in allocated rent and facilities
expenses, a $0.4 million increase in manufacturing costs
for new product prototypes and a $0.1 million increase in
depreciation expense.

The following table presents our general and administrative
expenses for the periods indicated and related changes as
compared to the prior period (dollars in thousands):

Six Months

Ended December 31,

Change in

2009

2010

$

%

(unaudited)

General and administrative

$

4,508

$

6,711

$

2,203

49

%

General and administrative expenses increased $2.2 million
from the six months ended December 31, 2009 to the six
months ended December 31, 2010, primarily due to an
increase in the number of general and administrative employees,
from 27 as of December 31, 2009 to 53 as of
December 31, 2010. This resulted in a $2.5 million
increase in personnel-related costs. This increase was offset by
a $1.0 million insurance claim reimbursement and a
$1.2 million decrease in legal costs, both related to the
resolution of litigation that was ongoing in 2009. The majority
of the remaining increase was due to a $0.6 million
increase in depreciation expense, a $0.4 million increase
in consulting services, $0.3 million increase in
professional accounting services and a $0.2 million
increase in allocated rent and facilities expenses.

Other Income
(Expense), Net

The following table presents our other income and expense for
the periods indicated and related changes as compared to the
prior period (dollars in thousands):

Six Months

Ended December 31,

Change in

2009

2010

$

%

(unaudited)

Other income (expense), net

$

(14

)

$

(506

)

$

492

351

%

Other income (expense), net increased $0.5 million from the
six months ended December 31, 2009 to the six months ended
December 31, 2010, primarily due to increased borrowings
under the revolving line of credit and increased expense
attributable to the revaluation of a warrant to purchase shares
of convertible preferred stock.

Results of
Operations for the Fiscal Years Ended June 30, 2008, 2009
and 2010

Revenue

The following table presents our revenue for the periods
indicated and related changes as compared to the prior periods
(dollars in thousands):

Year Ended

Year Ended

June 30,

Change in

June 30,

Change in

2008

2009

$

%

2009

2010

$

%

Revenue

$

648

$

10,150

$

9,502

1,466

%

$

10,150

$

36,216

$

26,066

257

%

2009 Compared to 2010. Revenue
increased $26.1 million from fiscal 2009 to fiscal 2010,
primarily due to the increase in the overall volume of our
products shipped.

2008 Compared to 2009. Revenue
increased $9.5 million from fiscal 2008 to fiscal 2009,
primarily due to the increase in our customer base and the
expansion of our product line.

Revenue from the 10 largest customers, including the applicable
OEMs, for each fiscal year was 71%, 47% and 75% of revenue for
fiscal 2008, 2009 and 2010, respectively. Two other customers
and Facebook each accounted for greater than 10% of our revenue
in fiscal 2010 and one customer accounted for greater than 10%
of our revenue in fiscal 2008. No other customer accounted for
greater than 10% of revenue in fiscal 2008, 2009 and 2010.
Revenue from customers with a ship-to location in the United
States accounted for 100%, 86% and 76% of revenue for fiscal
2008, 2009 and 2010, respectively.

Cost of
Revenue and Gross Margin

The following table presents our cost of revenue and gross
margin for the periods indicated and related changes as compared
to the prior periods (dollars in thousands):

Year Ended

Year Ended

June 30,

Change in

June 30,

Change in

2008

2009

$

%

2009

2010

$

%

Cost of revenue

$

377

$

5,000

$

4,623

1,226

%

$

5,000

$

16,018

$

11,018

220

%

Gross profit

271

5,150

4,879

1,800

5,150

20,198

15,048

292

Gross margin

42

%

51

%

51

%

56

%

2009 Compared to 2010. Cost of revenue
increased $11.0 million from fiscal 2009 to fiscal 2010,
primarily due to the increase in the volume of our products
shipped. Our gross margin increased from fiscal 2009 to fiscal
2010 due to favorable pricing of NAND Flash raw materials and
efficiencies resulting from economies of scale as our revenue
has increased. The increase in gross margin in fiscal 2010 was
offset by a $0.6 million inventory carrying value
adjustment that we recorded for obsolete inventory.

2008 Compared to 2009. Cost of revenue
increased $4.6 million from fiscal 2008 to fiscal 2009
primarily due to the corresponding increase in our revenue
driven by the increase in our customer base and the expansion of
our product line. Our gross margin increased from fiscal 2008 to
fiscal 2009 due to changes in the mix of our products sold and
efficiencies resulting from economies of scale as our revenue
increased.

Operating
Expenses

Sales and
Marketing

The following table presents our sales and marketing expenses
for the periods indicated and related changes as compared to the
prior periods (dollars in thousands):

Year Ended

Year Ended

June 30,

Change in

June 30,

Change in

2008

2009

$

%

2009

2010

$

%

Sales and marketing

$

2,856

$

13,476

$

10,620

372%

$

13,476

$

23,386

$

9,910

74%

2009 Compared to 2010. Sales and
marketing expenses increased $9.9 million from fiscal 2009
to fiscal 2010, primarily due to an increase in sales and
marketing personnel from 76 employees at the end of fiscal
2009 to 123 at the end of fiscal 2010, as we hired additional
employees to focus on acquiring new customers and expanding our
business into new geographic regions. This increase in headcount
resulted in an $8.1 million increase in personnel-related
costs, including a $2.6 million increase in sales
commissions. The majority of the remaining increase in sales and
marketing expenses from fiscal 2009 to fiscal 2010 was due to a
$0.8 million increase in travel-related costs, a

$0.5 million increase in product demonstration expenses, a
$0.4 million increase in consulting services, and a
$0.2 million increase in allocated rent and facilities
expenses. These increases were offset by a $0.3 million
decrease in marketing program costs, primarily related to
tradeshows.

2008 Compared to 2009. Sales and
marketing expenses increased $10.6 million from fiscal 2008
to fiscal 2009, primarily due to an increase in sales and
marketing personnel from 43 employees at the end of fiscal
2008 to 76 at the end of fiscal 2009. This increase in headcount
resulted in a $6.9 million increase in personnel-related
costs, including a $1.4 million increase in sales
commissions. The majority of the remaining increase consisted of
a $0.9 million increase in marketing program costs, a
$0.9 million increase in travel-related costs, a
$0.6 million increase in telecommunications and allocated
internal information systems infrastructure, a $0.4 million
increase in consulting services and a $0.4 million increase
in allocated rent and facilities expenses.

Research and
Development

The following table presents our research and development
expenses for the periods indicated and related changes as
compared to the prior periods (dollars in thousands):

Year Ended

Year Ended

June 30,

Change in

June 30,

Change in

2008

2009

$

%

2009

2010

$

%

Research and development

$

5,603

$

11,707

$

6,104

109%

$

11,707

$

15,977

$

4,270

36%

2009 Compared to 2010. Research and
development expenses increased $4.3 million from fiscal
2009 to fiscal 2010, primarily due to an increase in research
and development personnel from 74 employees at the end of
fiscal 2009 to 97 at the end of fiscal 2010, resulting in a
$3.4 million increase in personnel-related costs. The
increase was also due to a $0.4 million increase in
manufacturing costs for new product prototypes, a
$0.3 million increase in engineering consulting services
and a $0.2 million increase in depreciation expense.

2008 Compared to 2009. Research and
development expenses increased $6.1 million from fiscal
2008 to fiscal 2009, primarily due to an increase in research
and development personnel from 33 employees at the end of
fiscal 2008 to 74 at the end of fiscal 2009, resulting in a
$5.7 million increase in personnel-related costs. The
majority of the remaining increase was due to a
$0.4 million increase in allocated rent and facilities
expenses, a $0.3 million increase in travel-related
expenses, a $0.3 million increase in telecommunications and
allocated internal information systems infrastructure, a
$0.2 million increase in depreciation expense, a
$0.2 million increase in small equipment expense and a
$0.2 million increase in engineering consulting services.
These increases were offset by a $1.7 million decrease in
manufacturing costs for product prototypes.

General and
Administrative

The following table presents our general and administrative
expenses for the periods indicated and related changes as
compared to the prior periods (dollars in thousands):

Year Ended

Year Ended

June 30,

Change in

June 30,

Change in

2008

2009

$

%

2009

2010

$

%

General and administrative

$

1,712

$

4,849

$

3,137

183%

$

4,849

$

12,383

$

7,534

155%

2009 Compared to 2010. General and
administrative expenses increased $7.5 million from fiscal
2009 to fiscal 2010, in part due to an increase in general and
administrative personnel from 22 employees at the end of fiscal
2009 to 42 at the end of fiscal 2010, resulting in a
$2.6 million increase

in personnel-related costs. In addition, there was a
$2.7 million increase in legal costs related to the
resolution of legal proceedings. The majority of the remaining
increase from 2009 to fiscal 2010 consisted of a
$0.6 million increase in depreciation expense, primarily
related to computer equipment and leasehold improvements, a
$0.4 million increase in software support and expensed
equipment, a $0.3 million increase in professional
accounting fees, a $0.3 million increase in allocated rent
and facilities expenses and a $0.2 million increase in
travel-related expenses.

2008 Compared to 2009. General and
administrative expenses increased $3.1 million from fiscal
2008 to fiscal 2009, primarily due to an increase in general and
administrative personnel from 10 employees at the end of
fiscal 2008 to 22 at the end of fiscal 2009, resulting in a
$1.3 million increase in personnel-related costs, a
$0.9 million increase in legal costs, a $0.6 million
increase in consulting services, a $0.3 million increase in
software support and expensed equipment, a $0.2 million
increase in depreciation expense and a $0.2 million
increase in sales tax expense.

Other Income
(Expense), net

The following table presents our other income (expense) for the
periods indicated and related changes as compared to the prior
periods (dollars in thousands):

Year Ended

Year Ended

June 30,

Change in

June 30,

Change in

2008

2009

$

%

2009

2010

$

%

Other income (expense), net

$

(75

)

$

(690

)

$

615

820%

$

(690

)

$

(156

)

$

(534

)

(77)%

2009 Compared to 2010. Interest expense
decreased by $0.6 million from fiscal 2009 to fiscal 2010,
primarily due to a $0.5 million decrease in interest
expense related to the conversion or repayment of
$15.4 million of outstanding convertible notes.

2008 Compared to 2009. Interest expense
increased by $0.7 million from fiscal 2008 to fiscal 2009
due to a $0.5 million increase in interest expense related
to convertible notes, a $0.1 million increase in interest
expense attributable to a warrant to purchase convertible
preferred stock and a $0.1 million increase in interest
expense on debt and capital leases.

Quarterly
Results of Operations

The following tables present, in dollars and as a percentage of
revenue, unaudited quarterly consolidated results of operations
data for each of the quarters presented. The unaudited
consolidated financial statements for each of these quarters
were prepared on a basis consistent with our audited
consolidated financial statements and include all adjustments,
consisting of normal and recurring adjustments, that we consider
necessary for a fair presentation of the financial position and
results of operations as of and for such periods. You should
read these tables in conjunction with our consolidated financial
statements and the related notes located elsewhere in this
prospectus. The

Revenue has increased sequentially in most of the quarters
presented due to increases in the volume of products sold.
Revenue increased $6.2 million from the three months ended
December 31, 2009 to the three months ended March 31,
2010 primarily due to sales to three customers. Revenue
increased $16.1 million from the three months ended
June 30, 2010 to the three months ended September 30,
2010 primarily due to sales to one customer.

Gross margin for the three months ended June 30, 2010 was
lower due to a $0.6 million inventory carrying value
adjustment that we recorded for obsolete inventory. Gross margin
for the three months ended September 30, 2010 decreased
sequentially, primarily due to lower gross margins on high
volume sales to one significant customer. The gross margin for
the three months ended December 31, 2010 increased
sequentially due to a significantly lower volume of sales to the
same significant customer.

Operating expenses in all quarters increased sequentially as we
continued to add headcount and incurred related costs to
accommodate our growth.

For the three months ended June 30, 2010, sales and
marketing expenses were 80% of revenue compared to 46% of
revenue in the prior quarter, primarily due to a
$2.0 million increase in personnel-related expenses. This
increase was due to bonuses earned by certain sales employees
for achieving fiscal 2010 sales goals and due to the overall
growth in the number of employees in our sales and marketing
organizations.

For each of the three months ended September 30, 2009,
March 31, 2010 and June 30, 2010, our general and
administrative expenses trended higher compared to the other
quarters presented, primarily due to an increase in legal costs
related to the resolution of litigation. General and
administrative expenses for the three months ended
December 31, 2010 were partially offset by a
$1.0 million insurance reimbursement of legal fees related
to the resolution of litigation.

Liquidity and
Capital Resources

Primary
sources of liquidity

As of December 31, 2010, our principal sources of liquidity
consisted of cash and cash equivalents of $3.5 million,
accounts receivable of $8.5 million and amounts available
under our revolving line of credit of approximately
$10.3 million. We had working capital of $39.2 million
as of December 31, 2010.

Historically, our primary sources of liquidity have been
proceeds from the issuance of convertible preferred stock and
convertible notes, customer payments for our products and
services and proceeds from our revolving line of credit. From
inception through December 31, 2010, we issued convertible
preferred stock with aggregate net proceeds of
$79.8 million, issued convertible notes with aggregate net
proceeds of $25.8 million and borrowed an aggregate of
$21.0 million from a financial institution, including the
$11.0 million outstanding as of December 31, 2010.

Our net cash used in operating activities for the six months
ended December 31, 2010 was $27.0 million, primarily
due to an increase in our inventory balances of
$23.3 million in order to fulfill current orders for our
products and due to investments we made to hire additional
headcount to support our current and anticipated growth. Our net
loss for the six months ended December 31, 2010 was
$8.2 million. Significant non-cash expenses included in net
loss were stock-based compensation of $2.0 million and
depreciation and amortization expense of $1.5 million.

Our net cash used in operating activities for fiscal 2010 was
$39.6 million and was primarily due to an increase in our
inventory balance of $21.2 million as a result of the
increasing demand for our products. We also had headcount
increases in all areas of our business from 172 employees
as of June 30, 2009 to 262 employees as of
June 30, 2010. Our net loss for 2010 was
$31.7 million. Significant non-cash expenses included in
net loss were stock-based compensation of $1.9 million and
depreciation and amortization expense of $1.5 million.

Our net cash used in operating activities for fiscal 2008 and
2009 was $8.7 million and $24.8 million, respectively,
and was primarily due to the investments we made during those
periods to grow the operating infrastructure necessary to
support the growth in our business. From June 30, 2008 to
June 30, 2009, we increased the total number of employees
in our company from 86 to 172. Our inventory balances also
increased from $0.7 million as of June 30, 2008 to
$4.0 million as of

June 30, 2009 due to increased demand for our products. Our
net loss for fiscal 2008 was $10.0 million compared to a
net loss of $25.6 million for fiscal 2009. Our fiscal
2008 net loss included non-cash stock-based compensation
expense of $0.3 million and for fiscal 2009, the net loss
included non cash depreciation and amortization of
$0.7 million and stock-based compensation expense of
$1.0 million.

Investing
Activities

Cash flows from investing activities primarily relate to
purchases of computer equipment, leasehold improvements and
machinery and equipment to support our growth. Investing
activities also includes purchases, sales and maturities of our
short-term investments in
available-for-sale
securities.

During the six months ended December 31, 2010, our net cash
provided by investing activities was $9.5 million and was
primarily due to the net proceeds from the sale of short-term
investments of $12.0 million, less cash used for the
purchases of property and equipment of $2.5 million. For
fiscal 2010, our net cash used in investing activities was
$14.3 million, including $13.9 million for purchases
of short-term investments and $3.4 million for purchases of
property and equipment. For fiscal 2009, our net cash used in
investing activities was $3.6 million, including
$2.4 million from purchases of property and equipment and
$1.2 million from purchases of short-term investments. In
fiscal 2008, our cash used in investing activities was
$1.2 million, all related to purchases of property and
equipment.

Financing
Activities

Cash flows from financing activities primarily include net
proceeds from issuances of convertible preferred stock and
proceeds and payments related to issuances of convertible notes
and loans from a financial institution.

We generated $11.8 million of net cash from financing
activities during the six months ended December 31, 2010,
primarily due to $11.0 million that we borrowed from a
financial institution.

We generated $46.7 million in net cash from financing
activities in fiscal 2010, including $43.8 million of net
proceeds from the issuance of our Series C convertible
preferred stock, $5.0 million from the issuance of
convertible notes and $4.0 million from a loan with a
financial institution. We repaid the $4.0 million loan
prior to the end of fiscal 2010. We generated $42.6 million
in cash from financing activities in fiscal 2009, primarily due
to the $28.1 million received from the issuance of our
Series B convertible preferred stock, the
$15.4 million from the issuance of convertible notes and
the $6.0 million from a loan with a financial institution.
We repaid the $6.0 million loan prior to the end of fiscal
2009. We generated $12.1 million in cash from financing
activities in fiscal 2008, primarily due to the
$7.2 million received from the issuance of our
Series A convertible preferred stock and $5.2 million
from the issuance of convertible notes.

Revolving Line
of Credit

In September 2010, we amended and restated our loan and security
agreement, or the revolving line of credit, with a financial
institution. The revolving line of credit allows us to borrow up
to a limit of $25.0 million, with a sublimit of
$6.0 million for letters of credit, certain cash management
services and foreign exchange forward contracts. As of
December 31, 2010, we had $11.0 million outstanding
under the revolving line of credit and had obtained letters of
credit totaling approximately $3.6 million. The borrowing
limit can fluctuate due to a borrowing base consisting of our
combined accounts receivable and inventory balances. Borrowings
under the revolving line of credit accrue interest at a floating
per annum rate equal to one-half of one percentage point (0.50%)
above the prime rate as published in the Wall Street Journal. An
unused commitment fee equal to 0.375% of the difference between
the $25.0 million limit and the average daily balance of
borrowings outstanding each quarter is due on the last day of
such quarter. The revolving line of credit includes a prepayment
penalty of approximately $0.3 million if outstanding
advances are prepaid and the line is cancelled prior to
September 2011. The revolving line of credit is secured by
substantially all our assets. As of

December 31, 2010, the interest rate on the outstanding
principal balance was 3.75% per annum with interest due and
payable on a monthly basis.

We can borrow against the revolving line of credit until its
maturity date in September 2012, at which time all unpaid
principal and interest shall be due and payable. Under the terms
of the revolving line of credit, we are required to maintain the
following minimum financial covenants on a consolidated basis:



A ratio of current assets to current liabilities plus, without
duplication, any of our obligations to the financial
institution, of at least 1.25 to 1.00 measured on a quarterly
basis.



A tangible net worth of at least $25.0 million, plus 25% of
the net proceeds received by us from the sale or issuance of our
equity or subordinated debt, such increase, which, following the
completion of this offering, will be measured on a quarterly
basis.

As of December 31, 2010, we were in compliance with these
covenants.

Future Capital
Requirements

Our future capital requirements will depend on many factors,
including our rate of revenue growth, the expansion of our sales
and marketing activities, the timing and extent of spending to
support product development efforts and the expansion into new
territories, the timing of new product introductions, the
building of infrastructure to support our growth and the
continued market acceptance of our products.

We believe that our cash and cash equivalents and available
amounts under the revolving line of credit, will be sufficient
to meet our working capital and capital expenditure requirements
for at least the next 12 months. Although we are not
currently a party to any agreement or letter of intent regarding
potential investments in, or acquisitions of, complementary
businesses, applications or technologies, we may enter into
these types of arrangements, which could require us to seek
additional equity or debt financing. If required, additional
financing may not be available on terms that are favorable to
us, if at all. If we raise additional funds through the issuance
of equity or convertible debt securities, the percentage
ownership of our stockholders will be reduced and these
securities might have rights, preferences and privileges senior
to those of our current stockholders. We cannot assure you that
additional financing will be available or that, if available,
such financing can be obtained on terms favorable to our
stockholders and us.

Off Balance Sheet
Arrangements

During the periods presented, we did not have any relationships
with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or special
purpose entities, which would have been established for the
purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purpose.

Contractual
Obligations and Material Commitments

The following is a summary of our contractual obligations as of
June 30, 2010 (in thousands):

In December 2010, we terminated leases for certain office
facilities. As a result, the operating lease obligations
disclosed above were decreased by $2.9 million in total,
comprised of decreases of $0.1 million, $1.4 million,
$1.4 million and $0.0 due in less than one year, one to
three years, three to five years and more than five years from
June 30, 2010, respectively.

(2)

Purchase obligations include non-cancelable purchase orders for
raw materials inventory. Purchase obligations under purchases
orders or contracts that we can cancel without a significant
penalty, such as routine purchases for operating expenses are
not included in the above table.

(3)

The above table does not include the $11.0 million
outstanding under our revolving line of credit that we borrowed
subsequent to June 30, 2010. The $11.0 million must be
repaid on or prior to its maturity in September 2012. As of
December 31, 2010, the variable interest rate on the
outstanding principal balance was 3.75% per annum with interest
due and payable on a monthly basis. Assuming the
$11.0 million principal balance and a constant interest
rate of 3.75%, our interest payments will total approximately
$0.8 million through the maturity date of the revolving
line of credit or $0.2 million due in less than 1 year
from June 30, 2010 and $0.6 million due in 1 to
3 years from June 30, 2010.

Operating lease payments primarily relate to our leases of
office space with various expiration dates through 2021. The
terms of these leases often include periods of free rent, or
rent holidays, and increasing rental rates over time. In May
2010, we entered into new leases to expand our primary office
facilities in Salt Lake City, Utah. The term of these leases
include an initial lease term that ends in September 2021, plus
the option for us to extend the lease for an additional five
years. These leases include rent holidays during the first year
beginning with the lease effective date and also require us to
provide the lessor letters of credit in aggregate amount of
$3.0 million.

Indemnification

We agreed to indemnify our officers and directors for certain
events or occurrences, while the officer or director is or was
serving at our request in such capacity. The maximum amount of
potential future indemnification is unlimited; however, we have
a director and officer insurance policy that limits our exposure
and could enable us to recover a portion of any future amounts
paid. We are unable to reasonably estimate the maximum amount
that could be payable under these arrangements since these
obligations are not capped but are conditional to the unique
facts and circumstances involved. Accordingly, we have no
liabilities recorded for these agreements as of
December 31, 2010.

Many of our agreements with channel partners and customers
generally include certain provisions for indemnifying the
channel partners and customers against liabilities if our
products infringe a third partys intellectual property
rights. To date, we have not incurred any material costs as a
result of such indemnification provisions and have not accrued
any liabilities related to such obligations in our consolidated
financial statements.

Controls and
Procedures

In connection with its audit of our consolidated financial
statements for fiscal 2008, 2009 and 2010, our independent
registered public accounting firm noted certain material
weaknesses in our internal control over financial reporting.

A deficiency in internal control exists when the design or
operation of a control does not allow management or employees,
in the normal course of performing their assigned functions, to
prevent, or detect and correct misstatements on a timely basis.
A material weakness is a deficiency, or combination of
deficiencies, in internal control, such that there is a
reasonable possibility that a material misstatement of the
entitys financial statements will not be prevented, or
detected and corrected on a timely basis.

In connection with the audit of our financial statements for
fiscal 2008 and 2009, our independent registered public
accounting firm noted a material weakness in our financial
statement close process. This was primarily the result of the
early stage of our business and the lack of a sufficient number
of accounting personnel, including accounting personnel with
technical accounting and financial reporting experience. This
material weakness resulted in the recording of a substantial
number of audit adjustments over the two fiscal years ended
June 30, 2009.

In connection with the audit of our financial statements for
fiscal 2010, our independent registered public accounting firm
noted that we had a material weakness specifically relating to
the financial statement close process as of June 30, 2010.
Specifically, we had a lack of formal accounting policies and
procedures related to the identification of unique contract
terms that affected revenue recognition, proper identification
and accounting for inventory in transit and evaluation units and
the recording of certain expenses in the proper period. While we
had taken steps to remedy the material weakness noted in the
prior audit, as of June 30, 2010, we still had not fully
staffed our accounting department with technical accounting and
financial reporting experience, given our rapid growth in fiscal
2010.

Since July 1, 2010, we have taken and are continuing to
take additional steps intended to remedy these matters,
including hiring additional accounting personnel and
implementing additional policies and procedures associated with
our financial statement close process. Since July 1, 2010
we have added 10 employees with technical accounting and
financial reporting experience in our accounting department.
Additionally, we are working with an outside firm to help
document and structure our internal controls over our financial
statement close process. However, we will not be able to fully
address these matters until our newly hired professionals have
had time to implement the new policies and procedures.

Certain Critical
Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance
with U.S. generally accepted accounting principles, or
GAAP. The preparation of these consolidated financial statements
requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue, expenses and
related disclosures. These estimates and assumptions are often
based on judgments that we believe to be reasonable under the
circumstances at the time made, but all such estimates and
assumptions are inherently uncertain and unpredictable. Actual
results may differ from those estimates and assumptions, and it
is possible that other professionals, applying their own
judgment to the same facts and circumstances, could develop and
support alternative estimates and assumptions that would result
in material changes to our operating results and financial
condition. We evaluate our estimates and assumptions on an
ongoing basis. Our estimates are based on historical experience
and various other assumptions that we believe to be reasonable
under the circumstances. Our actual results could differ from
these estimates.

We believe that the assumptions and estimates associated with
revenue recognition, stock-based compensation, inventory
valuation, warranty liability and income taxes have the greatest
potential impact on our consolidated financial statements.
Therefore, we consider these to be our critical accounting
policies and estimates. For further information on all of our
significant accounting policies, please see note 1 of the
accompanying notes to our consolidated financial statements.

Revenue
Recognition

We derive our revenue from sales of products and support
services and enter into multiple-element arrangements in the
normal course of business with our customers and channel
partners. In all of our arrangements, we do not recognize
revenue until we can determine that persuasive evidence

of an arrangement exists, delivery has occurred, the fee is
fixed or determinable, and we deem collection to be reasonably
assured. In making these judgments, we evaluate these criteria
as follows:



Evidence of an Arrangement  We consider a
non-cancelable agreement signed by a customer or channel partner
or purchase order generated by a customer or channel partner to
be persuasive evidence of an arrangement.



Delivery has Occurred  We consider delivery to
have occurred when product has been delivered to the customer
and no post-delivery obligations exist other than ongoing
support obligations under sold support services. In instances
where customer acceptance is required, delivery is deemed to
have occurred when customer acceptance has been achieved.



Fees are Fixed or Determinable  We consider
the fee to be fixed or determinable unless the fee is subject to
refund or adjustment or is not payable within normal payment
terms. If the fee is subject to refund or adjustment, we
recognize revenue net of estimated returns or if a reasonable
estimate cannot be made, when the right to a refund or
adjustment lapses.



Collection is Reasonably Assured  We conduct a
credit worthiness assessment on all our customers, OEMs and
channel partners. Generally we do not require collateral. We
continue to evaluate collectability by reviewing our
customers and channel partners credit worthiness
including a review of past transaction history. Our payment
terms are typically net-30 days with terms up to net-60
days for certain customers and channel partners. Collection is
reasonably assured if, based upon our evaluation, we expect that
the customer will be able to pay amounts under the arrangement
as payments become due. If we determine that collection is not
reasonably assured, revenue is deferred and recognized upon the
receipt of cash.

For multiple-element arrangements originating on or prior to
June 30, 2009, the total consideration in these
arrangements was not allocated between product and support
services revenue because we did not have objective and reliable
evidence of fair value of the support services. Accordingly, the
total consideration in such arrangements is deferred and
recognized ratably over the support service period ranging from
one to three years.

In October 2009, the Financial Accounting Standards Board, or
FASB, amended the accounting standard for multiple-element
revenue arrangements. The new standard changes the requirements
for establishing separate units of accounting in a
multiple-element arrangement and requires the allocation of
arrangement consideration to each deliverable using the relative
selling price. We early adopted this accounting standard
effective as of July 1, 2009.

The impact of adopting this new accounting standard was as
follows on our consolidated statements of operations (in
thousands):

Year Ended

June 30,

2010

Increase in revenue

$

1,574

Increase in cost of revenue

(409

)

Decrease to loss before income taxes

1,165

Decrease to net loss

1,165

For multiple-element arrangements originating or materially
modified on or after July 1, 2009, we evaluated whether
each deliverable could be accounted for as separate units of
accounting. A deliverable constitutes a separate unit of
accounting when it has stand-alone value and for an arrangement
where a general right of return exists relative to a delivered
item, delivery or performance of the undelivered item must be
considered probable and substantially in our control.
Stand-alone value exists if the product or service is sold
separately. We allocate the total arrangement consideration to
each separable element of an arrangement based upon the relative
selling price of each element.

We allocate arrangement consideration at the inception of an
arrangement to all deliverables based on the relative selling
price method in accordance with the selling price hierarchy,
which includes: (1) vendor-specific objective evidence, or
VSOE, if available; (2) third-party evidence, or TPE, if
vendor-specific objective evidence is not available; and
(3) best estimate of selling price, or BESP, if neither
VSOE nor TPE is available.



VSOE  We determine VSOE based on our
historical pricing and discounting practices for the specific
product or support service when sold separately. In determining
VSOE, we require that a substantial majority of the selling
prices for products or support services fall within a reasonably
narrow pricing range. We have historically priced our products
within a narrow range and have used VSOE to allocate the selling
price of deliverables for product sales.



TPE  When VSOE cannot be established for
deliverables in multiple element arrangements, we apply judgment
with respect to whether we can establish selling price based on
TPE. TPE is determined based on competitor prices for similar
deliverables when sold separately. Generally, our products
differ from those of our peers such that the comparable pricing
of support services with similar functionality cannot be
obtained. Furthermore, we are unable to reliably determine what
similar competitor services selling prices are on a
stand-alone basis. As a result, we have not been able to
establish selling price based on TPE.



BESP  When we are unable to establish selling
price using VSOE or TPE, we use BESP in our allocation of
arrangement consideration. The objective of BESP is to determine
the price at which we would transact a sale if the product or
support service was sold on a stand-alone basis. We determine
BESP for deliverables by considering multiple factors including,
but not limited to, prices we charge for similar offerings,
sales volume, geographies, market conditions, competitive
landscape and pricing practices.

In addition, we recognize revenue net of estimated product
returns and pricing adjustments. Estimates for these items are
based on historical experience and are recorded at the time of
revenue recognition or when circumstances change resulting in a
change in the number of estimated returns. If our estimates are
incorrect, our actual results could change materially.

Deferred revenue resulted from the deferral of product and
support service revenue from multiple element arrangements prior
to June 30, 2009 and from July 1, 2009 deferred
revenue represents customer billings in excess of revenue
recognized, primarily for support services. Support services are
typically billed on an annual basis in advance and revenue is
recognized ratably over the support period of one to three years.

Stock-Based
Compensation

Under ASC 718, stock-based compensation cost for each award
is estimated at the grant date based on the awards fair
value as calculated by an option-pricing model and is recognized
as expense over the requisite service period. We use the
Black-Scholes-Merton option-pricing model which requires various
highly judgmental assumptions including the estimated fair value
of our common stock, volatility over the expected life of the
option, stock option exercise and cancellation behaviors,
risk-free interest rate and expected dividends. We estimated the
fair value of each option granted using the following
assumptions for the periods presented in the table below.

Because our stock is not publicly traded, we estimate the fair
value of common stock as discussed below.



Volatility  As we do not have a trading
history for our common stock, the expected stock price
volatility for our common stock was estimated by taking the
average historic price volatility for a group of companies we
consider our peers based on a number of factors including, but
not limited to, similarity to us with respect to industry,
business model, stage of growth, financial risk or other
factors, along with considering the future plans of our company
to determine the appropriate volatility over the expected life
of the option. We used the daily price of these peers over a
period equivalent to the expected term of the stock option
grants. We did not rely on implied volatilities of traded
options in our peers common stock because the volume of
activity was relatively low. We intend to continue to
consistently apply this process using the same or similar public
companies until a sufficient amount of historical information
regarding the volatility of our own common stock share price
becomes available, or unless circumstances change such that the
identified companies are no longer similar to us, in which case,
more suitable companies whose share prices are publicly
available would be utilized in the calculation.



Expected Life  The expected life was based on
the simplified method allowed under SEC guidance, which is
calculated as the average of the options contractual term
and weighted-average vesting period. We use this method as we
have limited historical stock option data that is sufficient to
derive a reasonable estimate of the expected life of an option.



Dividend Yield  We have never declared or paid
any cash dividends and do not presently plan to pay cash
dividends in the foreseeable future. Consequently, we used an
expected dividend yield of zero.



Risk-free Interest Rate  The risk-free
interest rate was determined by reference to the
U.S. Treasury rates with the remaining term approximating
the expected option life assumed at the date of grant.

In addition, we are required to estimate the expected forfeiture
rate and only recognize expense for those options expected to
vest. We estimate the forfeiture rate based on our historical
experience. Further, to the extent our actual forfeiture rate is
different from our estimate, stock-based compensation expense is
adjusted accordingly. If any of the assumptions used in the
Black-Scholes-Merton stock-option model change significantly,
the fair value and stock-based compensation expense on future
grants is impacted accordingly and stock-based compensation
expense may differ materially in the future from that recorded
in the current period.

The following table sets forth all stock option grants since
July 1, 2009 through the date of this prospectus:

Common Stock

Number of Shares

Fair Value per

Intrinsic Value

Subject to Options

Share at

per Share at

Grant Date

Granted

Exercise Price

Grant Date

Grant Date

September 22, 2009

1,261,800

$

0.65

$

0.65

$



November 18, 2009

1,165,000

0.65

0.65



December 15, 2009

262,950

0.65

0.65



February 12, 2010

310,000

0.65

0.65



March 2, 2010

1,061,638

0.65

0.65



March 16, 2010

625,000

0.65

0.65



May 28, 2010

2,484,646

1.96

1.96



July 27, 2010

1,991,131

1.96

1.96



September 12, 2010

1,300,000

1.96

4.07

2.11

October 26, 2010

1,136,300

4.07

4.07



January 25, 2011

4,307,050

5.12

5.12



February 19, 2011

591,500

5.12

5.12



The estimates of the fair value of our common stock were made
based on information from contemporaneous valuations on the
following valuation dates:

Fair Value

Valuation Date

per Share

March 9, 2009

$

0.65

May 21, 2010

1.96

October 8, 2010

4.07

December 31, 2010

5.12

The fair value of the common stock underlying our stock options
was determined by our board of directors, which intended all
options granted to be exercisable at a price per share not less
than the per share fair value of our common stock underlying
those options on the date of grant. Since our common stock is
not publicly traded, we considered objective and subjective
factors in valuing our common stock at each valuation date in
accordance with the guidance in the American Institute of
Certified Public Accountants Practice Aid Valuation of
Privately-Held-Company Equity Securities Issued as
Compensation, or Practice Aid. The assumptions we use in the
valuation model are based on future expectations combined with
management judgment. Objective and subjective factors to
determine the fair value of our common stock as of the date of
each option grant, including the following:



rights, preferences and privileges of our convertible preferred
stock relative to the common stock;



the prices of our convertible preferred stock sold to outside
investors in arms-length transactions;



our operating performance and financial position including the
value of our assets;

In the contemporaneous common stock valuations performed on
March 9, 2009, May 21, 2010, October 8, 2010 and
December 31, 2010, the fair value of our common stock was
determined considering two valuation approaches, the income
approach and market approach. Due to our early stage of
development and the lack of directly comparable financial
performance and trends as compared to a peer group, we only used
the income approach for valuations on March 9, 2009 and
May 21, 2010. For the October 8, 2010 and
December 31, 2010 valuations, we used both approaches and
weighted the results equally. The equal weighting of these two
approaches reflects our view that both these valuation methods
provide a reasonable estimate of fair value are equally reliable
and resulted in similar values.

The income approach quantifies the present value of the future
cash flows that management expects to achieve over a certain
period and estimates the present value of cash flows beyond that
period, which is referred to as the terminal value. These future
cash flows were discounted to their present values using a
discount rate determined from industry studies that compare
venture capital required rates of return on investments at
different stages of a companys development. The discount
rate reflects the risks inherent in the cash flows and the
market rates of return available from alternative investments of
similar type and quality as of the valuation date. The discount
rates used in the common stock valuations on March 9, 2009,
May 21, 2010, October 8, 2010 and December 31,
2010 were 60.0%, 50.0%, 50.0% and 50.0%, respectively.

The market approach considers multiples of financial metrics
based on acquisition
and/or
trading multiples of a peer group of companies. These multiples
were then applied to our financial metrics to derive an
indication of value. The valuation on October 8, 2010 and
December 31, 2010 used a range around the average of
comparable company multiples for estimated enterprise value to
sales. The October 8, 2010 valuation used a range from
2.00x to 2.50x and the December 31, 2010 valuation used a
range from 2.25x to 2.75x to determine an implied low and high
enterprise value.

The resulting fair value obtained by these approaches was then
allocated to our equity using the option-pricing method. For the
May 21, 2010, October 8, 2010, and December 31,
2010 valuations, we allocated the value under a sale/merger
scenario and a scenario that considers us completing an initial
public offering, or IPO of our common stock. The weighting of
these scenarios at these valuation dates was as follows:

Sale/Merger

IPO

May 21, 2010

62.5

%

37.5

%

October 8, 2010

50.0

%

50.0

%

December 31, 2010

30.0

%

70.0

%

After the equity value was determined and allocated to our
respective stock from the above methods, a discount for the lack
of marketability of our common stock was applied for us being a
private company and a lack of a trading market. The
marketability discount used was 46.9%, 36.9%, 15.0% and 10.0%,
respectively, for the valuations on March 9, 2009,
May 21, 2010, October 8, 2010, and December 31,
2010.

At each grant date from June 2, 2009 through March 16,
2010, our board of directors considered objective and subjective
factors outlined above including the most recent contemporaneous
valuation of our common stock on March 9, 2009 and the
various closings of our Series B convertible preferred
stock financing at a consistent value from April 2009 to October
2009. For the grants in March 2010, the board considered our
financial position, the need for additional funding, the
probability of receiving additional funding, and the ability to
draw on a current revolving line of credit.

For the grants on May 28, 2010, our board of directors
considered objective and subjective factors including the most
recent contemporaneous valuation of our common stock on
May 21, 2010, the recent closing of our Series C
convertible preferred stock financing and current signed
customer orders. The May 28, 2010 valuation was higher than
the March 9, 2009 valuation principally due to an

increase in forecasted revenue as a result of recent sales
orders and a lower discount for marketability.

For the grants on July 27, 2010 and September 12,
2010, our board of directors considered objective and subjective
factors including the most recent contemporaneous valuation of
our common stock on May 21, 2010, the current financial
position including cash needs for inventory and the current
revenue and projected revenue from recently signed sales orders.
For the September 12, 2010 grants, our board also
considered the recent closing of our revolving line of credit
and the borrowings against that line of revolving credit for
financing our inventory growth.

For the grants on October 26, 2010, our board of directors
considered objective and subjective factors including the most
recent contemporaneous valuation of our common stock on
October 8, 2010, our current financial position, including
the need for cash to finance inventory, and our recorded first
quarter revenue and projected fiscal year-end revenue. The
October 8, 2010 valuation was higher than the May 21,
2010 valuation principally due to an increase in the terminal
value multiple from 2.25 to 2.50 times due to higher projected
cash flows, a larger allocation of value to the possibility of
an IPO versus a sale/merger, and a lower discount for
marketability from 36.9% to 15.0%.

For the grants on January 25, 2011, our board of directors
considered objective and subjective factors including the most
recent contemporaneous valuation of our common stock on
December 31, 2010, our current financial position, our
recorded second quarter revenue, our projected revenue for the
third quarter, the current economic environment, and the
likelihood of an IPO in the near term. While the revenue and
expense factors used for the income approach in our valuation
did not change materially between the October 8, 2010
valuation and the December 31, 2010 valuation, the terminal
value multiple was reduced from 2.50 to 2.75 times due to an
increase in the latest
12-month
multiples indicated by the comparable public companies, the
market approach multiples increased, more weight was placed on
the probability of the completion of an IPO versus a
sale/merger, and the discount for marketability went from 15% to
10% as a result of various initial public offering being
favorably received, indicating a significant improvement in the
market, and our board of directors increased interest in
pursuing an IPO in the nearer term.

Due to the proximity of the grant on September 12, 2010 to
the October 8, 2010 valuation and because in October 2010
our board of directors became more optimistic that we could
consider an IPO in the nearer term, we decided to use the
October 8, 2010 common stock valuation as fair value in our
calculation of stock compensation expense for the
September 12, 2009 grants. We determined, however, that the
July 27, 2010 option grant was properly granted at an
exercise price equal to the fair value determined as of
May 21, 2010, because at the time of grant the board of
directors believed the inputs used in the May 21, 2010
valuation were comparable to activity at July 27, 2010 and
the prospect of an IPO in the near term was comparable to that
at the time of the May 21, 2010 valuation and that the
decreased discount for marketability used in the October 8,
2010 valuation was therefore not appropriate to apply
retrospectively to the July 27, 2010 grant.

For fiscal 2008, 2009 and 2010 and the six months ended
December 31, 2009 and 2010, we had variable stock-based
compensation from grants to non-employees which accounted for
approximately $4,000, $18,000, $54,000, $17,000 and $124,000 of
stock-based compensation expense.

As of June 30, 2009 and 2010 and December 31, 2010,
there was approximately $3.3 million, $5.6 million and
$11.1 million, respectively, of unrecognized stock-based
compensation expense related to non-vested stock option awards
that we expect to be recognized over a weighted-average period
of 3.5, 3.2 and 3.3 years, respectively.

Assuming an initial public offering price of
$ per share, the midpoint of the
price range set forth on the cover page of this prospectus, the
intrinsic value of the options outstanding as of
December 30, 2010, was
$ million, of which
$ million related to the
options that were vested and
$ million related to the
options that were not vested.

Inventories consist of raw materials, work in progress, and
finished goods and are stated at the lower of cost, on the
average cost method, or market value. Our finished goods consist
of manufactured finished goods.

A portion of our inventory also relates to evaluation units
located at customer locations, as some of our customers test our
equipment prior to purchasing. The number of evaluation units
has increased due to our overall growth and an increase in our
customer base. We assess the valuation of all inventories,
including raw materials, work in progress and finished goods, on
a periodic basis. Inventory carrying value adjustments are
established to reduce the carrying amounts of our inventories to
their net estimated realizable values. Carrying value
adjustments are based on historical usage, expected demand and
evaluation unit conversion rate. Inherent in our estimates of
market value in determining inventory valuation are estimates
related to economic trends, future demand for our products and
technological obsolescence of our products. If actual market
conditions are less favorable than our projections, additional
inventory write-downs may be required.

Warranty
Liability

We provide our customers a limited product warranty of three
years for products shipped prior to January 1, 2010 and
five years for products shipped on or after January 1,
2010. Our standard warranties require us to repair or replace
defective products during such warranty period at no cost to the
customer. We estimate the costs that may be incurred under our
basic limited warranty and record a liability in the amount of
such costs at the time product sales are recognized. Factors
that affect our warranty liability include the number of
installed units, historical experience and managements
judgment regarding anticipated rates of warranty claims and cost
per claim. We assess the adequacy of our recorded warranty
liability each period and make adjustments to the liability as
necessary.

Income
Taxes

Significant judgment is required in determining our provision
for income taxes and evaluating our uncertain tax positions. We
record income taxes using the asset and liability method, which
requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have
been recognized in our financial statements or tax returns. In
estimating future tax consequences, generally all expected
future events other than enactments or changes in the tax law or
rates are considered. Valuation allowances are provided when
necessary to reduce deferred tax assets to the amount expected
to be realized.

We provide reserves as necessary for uncertain tax positions
taken on our tax filings. First, we determine if the weight of
available evidence indicates that a tax position is more likely
than not to be sustained upon audit, including resolution of
related appeals or litigation processes, if any. Second, based
on the largest amount of benefit, which is more likely than not
to be realized on ultimate settlement we recognize any such
differences as a liability. Because of our full valuation
allowance against the net deferred tax assets, any change in our
uncertain tax positions would not impact our effective tax rate.

In evaluating our ability to recover our deferred tax assets, in
full or in part, we consider all available positive and negative
evidence, including our past operating results, our forecast of
future market growth, forecasted earnings, future taxable income
and prudent and feasible tax planning strategies. The
assumptions utilized in determining future taxable income
require significant judgment and are consistent with the plans
and estimates we are using to manage the underlying businesses.
Due to the net losses incurred and the uncertainty of realizing
the deferred tax assets, for all the periods presented, we have
a full valuation allowance against our deferred tax assets.

As of June 30, 2010, we had federal and state net operating
loss carryforwards of $58.0 million and $54.3 million,
respectively, and federal and state research and development tax
credit

carryforwards in the amount of $0.5 million and
$0.2 million, respectively. In the future, we intend to
utilize any carryforwards available to us to reduce our tax
payments. A limited amount of these carryforwards will be
subject to annual limitations that may result in their
expiration before some portion of them has been fully utilized.

Recently
Issued and Adopted Accounting Pronouncements

Fair Value
Measurements

In January 2010, the FASB issued new accounting guidance
expanding disclosures regarding fair value measurements by
adding disclosures about the different classes of assets and
liabilities measured at fair value, the valuation techniques and
inputs used, the activity in Level 3 fair value
measurements and the transfers between Levels 1, 2 and 3.
The new disclosures and clarifications of existing disclosures
were effective for interim and annual reporting periods
beginning after December 15, 2009, except for the
disclosure requirements related to the activity in Level 3
fair value measurements. Those disclosure requirements are
effective for fiscal years beginning after December 15,
2010 and for interim periods within those fiscal years. We
adopted the new disclosures for fiscal 2011. Since the adoption
of the new standards only required additional disclosure, the
adoption did not have an impact on our consolidated financial
position, results of operations or cash flows.

Quantitative and
Qualitative Disclosures About Market Risk

Interest Rate
Risk

As of December 31, 2010, we had $11.0 million
outstanding under our revolving line of credit, which accrues
interest at a variable rate adjusted based on the prime rate
plus one-half of one percentage point (0.50%). If the prime rate
were to increase by 100 basis points, our interest expense
would increase approximately $0.1 million on an annual
basis, assuming consistent borrowing levels.

Foreign
Currency Risk

Our international sales and marketing operations incur expenses
that are denominated in foreign currencies. Although our
international operations are currently immaterial compared to
our operations in the United States, we expect to continue to
expand our international operations which will increase our
potential exposure to fluctuations in foreign currencies. Our
exposures are to fluctuations in exchange rates primarily for
the U.S. dollar versus the euro and the British pound.
Changes in currency exchange rates could adversely affect our
consolidated results of operations or financial position.
Additionally, our international sales and marketing operations
maintain cash balances denominated in foreign currencies. In
order to decrease the inherent risk associated with translation
of foreign cash balances into our reporting currency, we have
not maintained excess cash balances in foreign currencies. As of
December 31, 2010, we had $0.3 million of cash in
foreign accounts. To date, we have not hedged our exposure to
changes in foreign currency exchange rates and, as a result,
could incur unanticipated translation gains and losses. Through
December 31, 2010, all of our sales were billed in
U.S. dollars and therefore not subject to direct foreign
currency risk.

We have pioneered a next generation storage memory platform for
data decentralization. Our platform significantly improves the
processing capabilities within a datacenter by relocating
process-critical, or active, data from centralized
storage to the server where it is being processed, a methodology
we refer to as data decentralization. Our integrated hardware
and software solutions leverages non-volatile memory to
significantly increase datacenter efficiency and offers
enterprise grade performance, reliability, availability and
manageability. We sell our solutions through our global direct
sales force, OEMs, including Dell, HP and IBM, and other channel
partners. Since inception, we have shipped solutions aggregating
over 20 petabytes of enterprise class storage memory capacity to
more than 1,000 end-users.

Our data decentralization platform can transform legacy
architectures into next generation datacenters and allows
enterprises to consolidate or significantly reduce complex and
expensive high performance storage, high performance networking,
and memory-rich servers. Our platform enables enterprises to
increase the utilization, performance and efficiency of their
datacenter resources and to extract greater value from their
information assets. Many users of our platform have reported
achieving greater than 10 times the application throughput per
server through increased server utilization, resulting in
reductions to ongoing facility, energy and cooling expenses.

We were founded in 2005 and are based in Salt Lake City, Utah
and have significant operations in San Jose, California. As
of December 31, 2010, we had 348 employees globally,
including 114 research and development personnel. In the six
months ended December 31, 2010, we had three greater-than
10% customers, including Facebook, Inc. and two of our OEMs, HP
and IBM. We have experienced substantial growth over the past
three years; our revenue was $0.6 million,
$10.2 million and $36.2 million in fiscal 2008, 2009
and 2010, respectively, and $11.9 million and
$58.3 million in the six months ended December 31,
2009 and six months ended December 31, 2010, respectively.

Industry
Background

The profitability and long-term competitiveness of enterprises
increasingly depend on their ability to rapidly extract value
from their information assets while addressing the following key
challenges:



Growth in Quantity of Data  The amount of data
that enterprises are processing is growing at an exponential
rate. IDC predicts that by 2020 the amount of digital data will
grow 44 times to 35 zettabytes, or 35 billion terabytes,
from
2010.(2)



Growth in Frequency of Access to Data  The
number of people accessing information systems and the frequency
of their access are also growing substantially. More devices,
applications and services are being used more frequently. For
example, IMS estimates that by

(2) See
note (2) in the section entitled Market, Industry and
Other Data.

2020, 22 billion independent devices will be connected to
the Internet, up from approximately 5 billion in 2010.



Growing Demand for Faster, More Relevant
Responses  Enterprises and consumers expect
information systems to be real-time, on-demand, always-on and
highly responsive with relevant information. For example,
according to the TABB Group, in order to speed application
response times, financial services firms spent approximately
$15 billion in 2009 on datacenter relocation and
consolidation primarily to reduce electronic trading latency.

These challenges require datacenter infrastructure that can
process ever-increasing amounts of data at ever-increasing
rates. Since the value an enterprise can extract from its
information assets is determined by both the quantity and rate
at which data is processed, enterprises must address these
challenges. However, they are subject to many constraints,
including the following:



Limited Financial Resources  All enterprises
must prioritize their finite financial and other resources to
invest in their datacenter infrastructure and operations.
Despite the rapid growth in data, the increasing frequency of
data access, and the need for faster, more relevant responses,
worldwide spending on hardware, software and IT services is
expected to grow at only 5.9% in 2011 and at a 5.4% cumulative
annual growth rate from 2010 to 2014 according to Gartner.



Limited Resources for Datacenters  Datacenters
are highly specialized, require substantial energy, cooling and
space and require long lead times to build. Therefore,
enterprises face a practical limit on their ability to expand
existing datacenters or build new ones to meet the rapidly
growing demands to process data.



Pressure to be Energy Efficient  Building new
datacenters or expanding the capacity of existing datacenters
causes substantial increases in energy consumption. According to
the U.S. Department of Energy, datacenters can consume more
than 100 times more energy than a standard office building.
Further, according to IDC, in 2010 for every $1.00 of new server
expenditure, an incremental $0.62 was spent on power and cooling
expenses.(3)

To address the increased growth in quantity of data, frequency
of data access and performance demands, enterprises are
increasingly deploying costly and inefficient datacenter
infrastructure.

The Data Supply
Problem

The performance and efficiency of a datacenter is largely
determined by the quantity and rate at which data can be
supplied from storage to the server for processing. We refer to
this flow of data from storage through networking to servers for
processing as the data supply chain.

Legacy datacenter architectures using centralized storage cannot
effectively supply the increasingly large quantities of
process-critical data quickly enough to fully utilize the
processing capacity of todays servers, leading to low
levels of server utilization. We refer to this limitation as the
data supply problem. As a result of servers waiting idle,
processing capabilities are significantly underutilized.
According to IDC, in 2009 over 80% of servers were idle half of
the time and 37% of servers were idle 80% of the
time.(4)

While processing performance has doubled approximately every
18 months, the performance of other elements in the data
supply chain has not kept pace. This is especially true for the
storage infrastructure, which has been designed primarily to
optimize capacity growth, rather than performance growth. This
increasing gap between processing and storage performance
amplifies the data supply problem.

(3) and (4) See notes
(3) and (4) in the section entitled Market, Industry and
Other Data.

Traditional
Approaches Do Not Efficiently Address the Data Supply
Problem

We believe that traditional datacenter architectures cannot
adequately address the data supply problem, as they have not
scaled with the growth of processing performance. This leads to
greater complexity in the datacenter and ever increasing
inefficiencies in utilization, cost, physical space and energy
consumption.

Traditional approaches used to address the data supply problem
includes the following:



Deploy More Expensive Storage  To alleviate
the restriction that storage places on the data supply chain,
enterprises must deploy storage systems with a substantial
number of performance optimized hard disk drives in parallel.
These performance optimized drives are significantly more
expensive than commodity storage. According to IDC estimates in
2010, commodity performance optimized 3.5 hard disk drives
cost roughly $0.49 per
gigabyte(5) and
performance optimized storage hardware cost $2.42 per
gigabyte.(6)
We estimate additional software and services typically bundled
with storage systems added another $3.96 per gigabyte on average
in the storage industry, for a total of $6.38 per gigabyte.
Based on these estimates, we believe enterprises spend up to
13 times the cost of commodity disk drives to increase the
performance of slow disk drives. Additionally, according to IDC
estimates in 2010, input / output intensive storage
systems (inclusive of solid state drives) cost $23.16 per
gigabyte.(6)
We believe input / output intensive storage systems
provide incremental performance benefits but represent a
significant per gigabyte cost premium over performance optimized
storage. In aggregate, IDC estimates that enterprises will spend
roughly $18 billion on performance optimized storage
equipment in
2011.(6)



Deploy More Expensive Networking  Even after
deploying costly high performance storage, enterprises must then
deploy high performance networking infrastructure to transport
the data between the storage and the server. IDC estimates the
2011 cost of high performance 10 gigabit Ethernet networking
equipment to be roughly $1,319 per port, while the cost of 1
gigabit Ethernet networking equipment is estimated to be $77 per
port.(7)
Similarly, based on IDC data, we estimate the cost of a Fibre
Channel switch in 2011 to be $248 per
port.(8)
Based on these estimates, we believe high performance networking
infrastructure (Fibre Channel or 10 gigabit Ethernet) costs
from 3 to 17 times that of commodity networking infrastructure.
In aggregate, based on IDC data, we estimate the market for high
performance networking infrastructure to be approximately
$10 billion in
2011.(9)



Deploy More Expensive Servers  Even after
deploying costly high performance storage and high performance
networking, the data cannot be supplied at the necessary rates
to avoid server underutilization. To address this bottleneck in
the data supply chain, enterprises are deploying more richly
configured servers that contain higher amounts of memory to hold
more active data within the server to avoid going back and forth
to storage through networking as frequently. Based on IDC
estimates in 2009, memory-rich servers, which IDC defines as
servers with greater than 16 gigabytes of memory, generally cost
over 50% more than general-purpose servers and enterprises will
spend approximately $24 billion on memory-rich servers in
2011, accounting for over 51% of all server
spending.(10)



Scale Out Datacenters  Despite the
underutilization of physical servers, when deployed in large
enough quantities, lower cost, data supply constrained servers
can reach acceptable aggregated performance levels. Depending on
the degree of underutilization, the initial capital expenditure
of this type of server scale-out may be less expensive than
deploying a combination of performance-oriented storage and
networking and memory-rich servers. However, this approach leads
to increased numbers of servers, additional software licenses
and related infrastructure within datacenters which we refer to
as either datacenter or server sprawl.

(5)-(10) See
notes (5) through (10), respectively, in the section
entitled Market, Industry and Other Data.

Tune and Redesign Software Applications 
Because deploying high performance storage, networking and
additional servers does not resolve the data supply problem,
enterprises may invest heavily to tune or even redesign their
software applications to improve performance in a data supply
constrained environment. However, this increases the need for
expensive engineering and consulting resources, requires
significant investments of time, and can compromise application
reliability and time-to-market.



Utilize Cloud Computing  Because of the cost
and complexity of server sprawl caused by datacenter scale-out,
many enterprises are transferring the burden of this scale-out
to third-party hosted datacenter providers. Although this
approach reduces the cost associated with scale-out for a
particular enterprise, it fails to address the underlying
performance and efficiency limitations of the data supply
problem. Rather the data supply problem is transferred to the
third-party provider.



Introduce Server Virtualization  Server
virtualization allows multiple server workloads to be
consolidated on a single physical server. However, data for each
of these workloads must still be supplied to the physical
server, compounding the data supply problem. While
virtualization brings significant benefits in terms of workload
consolidation, its full potential to improve datacenter
efficiency remains constrained by the data supply problem.

In response to the challenges associated with the increased
growth in quantities of data, increased frequency of data access
and increased performance demands, enterprises continue to
deploy more costly infrastructure. Based on IDC data, we
estimate that approximately $52 billion will be spent in
2011 on high performance storage and networking and memory-rich
servers, excluding related spending on software and
services.(11)
As a result, incumbent storage, networking and memory vendors
have been reluctant to disrupt traditional approaches and seek
more efficient solutions.

Need for a Data
Decentralization Solution

A fundamentally new approach is needed to address the data
supply problem. We believe that this problem is analogous to the
challenges faced in manufacturing, where materials are
transported to the factory for assembly. If the manufacturing
supply chain is unable to provide a sufficient rate and quantity
of materials to meet production capacity, the factory becomes
underutilized. The concept of
just-in-time
manufacturing emerged to address underutilization by introducing
an inventory hub near the factory to ensure a steady and
uninterrupted flow of materials, optimizing production
utilization.

Similarly, in the datacenter, data is retrieved from centralized
storage and transported to the server where it is processed.
Applying the principle of
just-in-time
manufacturing to the data supply problem requires relocating
process-critical, or active, data from centralized
storage to the server where it is being processed, a methodology
we refer to as data decentralization.

We believe that effectively addressing the data supply problem
requires a decentralized storage-based solution that includes
the following:



hardware with sufficient capacity and rate of access, in a form
factor that can be integrated within industry-standard servers;



software that virtualizes storage resources and governs the flow
and management of data between storage and the server;



software that enables this platform to be utilized within both
new and existing datacenter architectures; and



software that centrally configures, manages and monitors this
new distributed infrastructure.

(11)
See note (1) in the section entitled Market, Industry
and Other Data.

This platform must also meet enterprise reliability,
availability and serviceability requirements.

Our
Solution

We have pioneered a next generation storage memory platform for
data decentralization. Our platform significantly improves the
processing capabilities within a datacenter by relocating
process-critical, or active, data from centralized
storage to the server where it is being processed. Our platform
enables enterprises to increase the utilization, performance and
efficiency of their datacenter resources and to extract greater
value from their information assets. Many users of our products
have reported achieving greater than 10 times the application
throughput per server through increased server utilization,
resulting in reductions to ongoing facility, energy and cooling
expenses. Our data decentralization platform can transform
legacy architectures into next generation datacenters and allows
enterprises to consolidate or significantly reduce complex and
expensive high performance storage, high performance networking
and memory-rich servers.

Manage Growth in Quantity of Data  With our
ioMemory, a server can currently hold over 10 terabytes of
active data. Since our platform utilizes non-volatile memory, we
believe our platform will scale capacity and performance in line
with processing growth over time. Further, our directCache
software is designed to enable enterprises to efficiently manage
greater amounts of data by automating the movement of the active
data to ioMemory from traditional high capacity, centralized
storage.



Manage Increasing Frequency of Access to Data 
Our platform can respond to hundreds of thousands of
requests for data per second, a significant improvement compared
to traditional approaches. This is possible because our ioMemory
connects a large array of non-volatile memory directly to a
servers high-speed system bus allowing data to be accessed
with memory-like performance. Further, our VSL software
integrates within a servers operating system and allows
multiple processor cores to simultaneously access the active
data in our ioMemory.



Improve Response Times, Relevancy and Value from
Data  By decentralizing data within the server,
our platform enables applications to rapidly and efficiently
access more data, perform deeper analytics on the data, and
produce more relevant responses in shorter periods of time. This
allows enterprises to extract greater value from their
information assets, including systems dedicated to decision
support, high performance financial analysis, web search,
content delivery and enterprise resource planning.

Reduce Total Cost of Ownership and Environmental
Impact  Through the use of our platform, our
customers can reduce, simplify and consolidate their purchases
of expensive storage, networking and memory-rich server
infrastructure and reduce their spending on costly software and
services. As a result, our platform enables customers to reduce
their datacenter infrastructure footprint, administrative
expenses and energy consumption related to power and cooling.



Unlock the Potential of Virtualization  Our
platform can significantly increase the processing capabilities
of server and desktop virtualization by allowing more active
data to quickly reach the numerous virtual servers inside a
single physical server. Further, by addressing the data supply
problem, our platform also enables data-intensive workloads to
be virtualized and enables more virtual servers and desktops to
be employed per physical server without experiencing performance
issues caused by data supply constraints.



Support More Cost-Effective Clouds and SaaS 
By enabling rapid access to large quantities of data, our
platform allows both cloud service providers and
software-as-a-service vendors to

significantly enhance the performance of the services they offer
and improve their underlying cost structures.

Case
Studies

The following are examples of how
end-users
have benefited from our solution:

Internet Web
Property

A leading Internet web property struggled with its growing
number of queries as traffic and data on the website increased.
The company was looking for a cost-effective, scalable solution
in order to improve query performance and provide real-time,
accurate results to its users. By using our solution, the
company reported that it:



increased query processing throughput by 9 times;



improved database replication by 30 times, ensuring that
responses included the most
up-to-date
data; and



reduced server footprint, power costs and datacenter overhead by
75%.

IT Security
Service Provider

A leading and fast-growing security service providers
datacenter infrastructure suffered from frequent performance
bottlenecks that required upgrading its server and storage
systems. The company was looking for a cost-effective, scalable
performance solution in order to improve response times to
end-users.
By using our solution, the provider reported that it:



improved application performance between 5 and 10 times;



reduced server footprint by more than 50%; and



lowered datacenter energy consumption by more than 40%.

Digital Media
Sharing Provider

With growing website traffic, it became increasingly critical
for this digital media sharing website to focus on the
availability and responsiveness of its website for customer
retention. Due to the large number of requests to view and
upload content and social interactions, the companys
website performance was constrained by the constant need for its
databases to access disk-based storage. By using our solution,
the provider reported that it:

One of the premier national laboratories in the United States
was preparing a data intensive test bed for a nuclear related
simulation and computing project. The test bed was required to
provide supercomputing-level performance while also reducing
power consumption to meet the laboratorys energy
efficiency initiatives. By using our solution, the laboratory
reported that it:



significantly increased performance to 52 million data
operations per second and 380 gigabytes per second aggregated
bandwidth;

utilized only 2 racks rather than the 54 racks needed by
comparable hard disk-based solutions; and



achieved the performance of over $300 million worth of
alternative all Flash-based systems.

Our
Strategy

Our objective is to expand our position as the leading provider
of storage memory platforms for data decentralization. The
principal elements of our strategy include:



Leverage Our First-to-Market Position in Data
Decentralization  As the pioneer in data
decentralization, we created an important new market category
with our next generation storage memory platform. We believe
that early leadership in data decentralization has afforded us a
strong leadership position and recognized brand, as evidenced by
having shipped solutions aggregating over 20 petabytes of
storage memory capacity to more than 1,000 end-users since our
inception. We intend to extend our position as the leader in
data decentralization by focusing on continued development and
extension of our technology and brand.



Continue Our Focus on Platform Solutions  We
have designed a comprehensive platform that includes our
ioMemory hardware, VSL virtualization software, automated
data-tiering
and platform management software into a single solution. This
approach allows our platform to be optimized for performance and
high reliability. It also facilitates our ability to introduce
new platform elements over time. Finally, this platform approach
enables us to realize the potential of non-volatile memory by
leveraging commodity non-volatile memory, such as NAND Flash, to
deliver a robust enterprise grade system. We believe this
differentiated platform approach will enable us to continue to
rapidly innovate and bring new elements of our data
decentralization solutions to market.



Extend Our Platform Differentiation Through Software
Innovation  We believe that continued software
innovation is critical to addressing the data supply problem.
Our extensible architecture allows us to enhance the
capabilities of our platform by adding additional software
components over time. In this regard, we have recently developed
our directCache and ioSphere software for incorporation into our
solution and intend to continue to add software functionality to
differentiate our products and extend our technology leadership
position.



Develop and Maintain Direct Customer Engagement 
Direct engagement with customers enables us to accelerate
the adoption of our platform through the direct and OEM-assisted
portions of our multi-tier distribution model. We have developed
and maintained a specialized global direct sales and sales
engineering team. This direct engagement strategy provides us
valuable feedback on our products and technology, allowing us to
continually enhance and expand our product offerings.



Leverage and Expand Our Server OEM Relationships 
We have established OEM relationships with Dell, HP and IBM.
We combine our direct engagement approach with our OEMs
substantial
go-to-market
resources to expand our reach and target potential customers.
Moreover, our OEMs provide a single point of accountability
where needed and supplement our internal customer service and
support capabilities. These OEMs also provide important product
validation for potential customers through their endorsement of
our technology and by integrating our platform into products
they offer to end-users. We also believe that our close OEM
relationships will allow us to collaborate in the development of
new applications using our platform. We intend to pursue
additional OEM relationships in the future to expand our market
reach.



Pursue International Opportunities  We believe
that international markets represent a significant growth
opportunity. We are expanding our global presence by growing
direct sales teams in international markets, leveraging our
established OEM relationships and pursuing additional

channel partners in those regions. We intend to focus our near
term international efforts in Asia Pacific and Europe.

Technology

Our next generation storage memory platform for data
decentralization integrates a diverse portfolio of enterprise
grade technologies. Our sophisticated hardware and software
design transforms commodity non-volatile memory into enterprise
class storage memory and provides interfaces between storage
memory resources and operating systems. In addition, our
advanced software capabilities include the development of new
and innovative storage applications, as well as platform
management software.

ioMemory
Hardware and Systems Architecture

Our ioMemory forms the basis of our hardware offering and is
designed as a portfolio of upgradeable modules, enabling faster
time-to-market and increased extensibility. ioMemory provides a
new type of server-based storage memory, integrates our
proprietary field programmable data-path controller and connects
a large array of non-volatile memory that provides up to 100
times the capacity density of dynamic random access memory, or
DRAM. Our ioMemory modules, which currently use NAND Flash
memory, can be aggregated to build storage systems of varying
capacity, performance and form factors. At the heart of the
ioMemory hardware is our proprietary data-path controller. It
connects a large array of non-volatile memory chips natively to
the servers PCI-Express peripheral bus, or PCIe, and
addresses the reliability issues of non-volatile memory with our
Flashback Protection advanced self-healing technology, which is
capable of restoring, correcting and resurrecting lost data in
the Flash-based storage
sub-system.
This is accomplished by using an advanced bit error correction,
proactive data integrity monitoring of stored data and dedicated
memory chips to automate the repair of failed devices in
real-time.

The modularity of ioMemory provides both manufacturing
flexibility and the ability to design and build new products
quickly. Traditional storage approaches use application specific
integrated circuits for their embedded controllers that are not
fully reprogrammable, creating the need for periodic redesigns,
which can be expensive and time consuming. ioMemory uses our
proprietary data-path controller that can be reprogrammed and
upgraded with new firmware, allowing the features of our
products to be expanded, customized, and upgraded by our
customers. In addition, by directly attaching to a servers
peripheral bus through the industry-standard PCIe interface, our
products can be installed into a servers PCIe expansion
slots, allowing customers to use our products either in new or
existing server datacenter equipment. Because our data-path
controllers are reprogrammable, our products can incorporate
non-volatile memory from a variety of suppliers and are more
readily adaptable to changes in non-volatile memory over time.
Although we use NAND Flash today, we believe we are unique in
our capability to quickly integrate the newest and highest
density non-volatile memory technologies as they become
available.

Our architecture allows our ioMemory to achieve access rates
approximately 1,000 times that of traditional hard disk drives
by combining the parallel performance from an array of
non-volatile memory devices, while avoiding the bottlenecks of
slow storage networks, controllers, buses and protocols. Our
approach differs substantially from those approaches used by
hybrid disk drive and most solid-state drive, or SSD, vendors
that are forced to emulate traditional hard disk drives and
utilize legacy interfaces and embedded controllers, which
constrain the flow of data between device and operating system,
resulting in low application performance due to the higher
access latency. Our technology manages the non-volatile memory
directly from the operating system, eliminating the need for
these legacy interfaces and embedded controllers in our solution.

Our VSL virtualization software enables ioMemory to operate as a
new data storage memory tier within the enterprise server and
with more efficiency and capability than traditional storage
devices using embedded controllers. VSL software integrates with
the servers operating system and provides native access to
data stored on ioMemory, bypassing legacy storage input / output
interfaces. In doing so, VSL software allows servers to achieve
significantly increased application performance and data
processing with low latency access and high bandwidth throughput
from the ioMemory hardware. Non-volatile memory, including NAND
Flash memory, is inherently asymmetrical in that read, program
and erase times are different, resulting in divergent read and
write access times. VSL software allows the non-volatile memory
in ioMemory to read and write with nearly equivalent times by
means of a log-structured data store that completes data
transactions in microseconds as opposed to alternative high
performance filing systems that complete data transactions in
milliseconds, which implies an approximately 1,000 times
improvement in storage performance. Because VSL software is
extensible, we are able to add new features such as our recently
introduced directCache data-tiering software and ioSphere
management software. VSL software runs on a variety of operating
systems, including Windows, Linux, VMware ESX/ESXi, Solaris and
Mac OS X.

Our ioDrive product families are a line of PCIe standard
form-factor storage memory platforms that combine one or more
ioMemory modules with our VSL software. We classify our ioDrive
products based on capacity, latency, bandwidth and input /
output operations per second, or IOPS. Our ioDrive products
offer the following standard specifications:

Our directCache software extends our ioMemory platform and
permits interoperability with traditional direct-attached,
network-attached, storage area network attached and appliance
attached backend storage systems. This software is designed to
intelligently identify, copy and cache to ioMemory the most
frequently accessed blocks of storage data from very large-scale
backend datasets. This active data can then be retrieved
significantly faster, allowing the applications accessing the
data to achieve performance as if the entire dataset were stored
locally on the ioMemory. This capability allows enterprises to
realize the benefits of our technology without replacing or
modifying their existing datacenter infrastructure. directCache
software was announced in November 2010 and will be released for
general availability in the first half of 2011. directCache
software is compatible with all of our ioDrive products.

ioSphere
Platform Management Software

ioSphere is a suite of management software purpose-built for our
storage memory infrastructure and designed around our data
decentralization platform. ioSphere software is accessible
through a graphical user interface that enables datacenter
administrators to centrally configure, monitor, manage and tune
all distributed ioMemory devices throughout the datacenter. In
addition, this software offers real-time, predictive and
historical reporting of ioMemorys performance and wear.
ioSphere software also includes our ioManager and ioDirector
modules. ioManager is a local device management software module
that allows customers to manage one or more ioMemory platforms
installed in a single server. ioDirector provides centralized
management of ioMemory platforms across multiple servers within
a datacenter. ioSphere management software was announced in
November 2010 and will be released for general availability in
the first half of 2011.

OEM
Products

Our OEMs, including Dell, HP and IBM, sell branded storage
memory solutions based on our standard products as well as
custom form-factor versions to fit specific applications. For
example, HP offers a tailored version of our technology in a
form-factor specific to its C-class blade servers, which it
markets as HP StorageWorks IO Accelerator.
Similarly, IBM incorporates a tailored version of our ioDrive
product into its InfoSphere Smart Analytics System
5600 and WebSphere XC10 Middleware appliances.

Our direct sales teams are typically comprised of a combination
of a field account manager, an inside sales representative, a
field systems engineer and a sales associate. The direct sales
process usually involves one or more of our direct sales
representatives. The sales cycle from the time of initial
prospect qualification to completion of an initial sale may take
a few days or several months. After initial deployment, our
sales personnel focus on ongoing account management and
follow-on sales.

We also have OEM-focused sales teams. These sales teams work
closely with our OEMs to maximize our global market penetration.
Our current OEMs include Dell, HP and IBM. Our OEMs sell and
support our products through their respective sales channels,
their direct distribution, their value added resellers and their
systems integrators. Our OEMs may integrate our platform into
their own proprietary product offerings or sell our standard
products.

We also work closely with a variety of other channel partners to
promote and sell our products. We offer a technology alliance
partnership program to create and develop joint hardware and
software

Since inception, we have shipped our solutions to more than
1,000 end-users. Our products are used in a variety of markets
such as financial services, Internet, technology, education,
retail, manufacturing, energy, life sciences and government.

We generally sell pursuant to individual purchase orders. Our
ten largest customers, including the applicable OEM customers,
accounted for an aggregate of 75% of our revenue in fiscal 2010,
and 47% of our revenue in fiscal 2009. The composition of the
group of our largest customers changes from period to period.
Our OEM customers IBM and HP and direct customer Facebook, each
accounted for more than 10% of our revenue in fiscal 2010. We
expect that sales of our products to a limited number of
customers will continue to account for a majority of our revenue
in the foreseeable future.

Customer
Support

We offer standard warranty service and support with our
products, including those sold directly or through resellers.
This includes periodic software updates and maintenance releases
and patches, if-and-when available, and other product support
such as Internet access to technical content and
24-hour
telephone and email access to technical support personnel. Our
OEMs provide primary product support for our products sold by
them. We also sell premium-tiered support pursuant to service
contracts. Service contracts typically have a one-year term,
though some customers contract for longer terms. Our support
personnel are based in San Jose, California and Salt Lake
City, Utah. As we expand internationally, we expect to continue
to hire additional technical support personnel to service our
global customer base.

Research and
Development

Our research and development efforts are focused primarily on
improving and enhancing our existing products and developing new
hardware and software solutions. We believe that software is
critical to expanding our leadership in data decentralization.
Accordingly, we are devoting the majority of our research and
development resources to software development. Our engineering
team has deep operating system expertise, including Linux kernel
contributors and developers with expertise in a variety of other
operating systems. We work closely with our customers to
understand their current and future needs and have designed a
product development process that integrates our customers
feedback.

We believe the timely development of new products is essential
to maintaining our competitive position. As of December 31,
2010, we had 114 employees in our research and development
organization, substantially all of whom were located at our
locations in Salt Lake City, Utah, Boulder, Colorado and
San Jose, California. We also supplement our research and
development efforts with third-party developers and contractors.
We also test our products to certify and ensure interoperability
with third-party hardware and software products, including PCIe
interoperability and OEM certification. We plan to dedicate
significant resources to these continued research and
development efforts.

Our research and development expenses were $10.5 million in
the six months ended December 31, 2010, $16.0 million
in fiscal 2010, $11.7 million in fiscal 2009 and
$5.6 million in fiscal 2008.

We outsource the manufacturing of our hardware products to our
contract manufacturers, AlphaEMS Manufacturing Corporation and
Jabil Circuit, Inc. We currently procure a majority of the
components used in our products directly from third-party
vendors and have them delivered to our contract manufacturers.
AlphaEMS and Jabil manufacture and assemble our products and
deliver them to us for labeling, quality assurance testing,
final configuration, including a final firmware installation,
and shipment to our customers.

Our manufacturing process is designed to minimize the amount of
inventory that we are required to retain to meet customer
demand. We place orders with our contract manufacturers on a
purchase order basis, and in general, we engage our contract
manufacturers to manufacture products to meet our forecasted
demand or when our inventories drop below certain levels. Our
agreements with our contract manufacturers require us to provide
regular forecasts for orders. However, we may cancel or
reschedule orders, subject to applicable notice periods and
fees, and delivery schedules requested by us in these purchase
orders vary based upon our particular needs. Our contract
manufacturers work closely with us to ensure design for
manufacturability and product quality.

Competition

We believe that the most important competitive factor in our
market is to provide a comprehensive platform with the following
attributes:



hardware incorporating sufficient capacity and rate of access,
in a form factor that can be integrated within industry-standard
servers;



software that virtualizes storage resources and governs the flow
and management of data between storage and the server;



software that enables this platform to be utilized within both
new and existing datacenter architectures; and



software that centrally configures, manages and monitors this
new distributed infrastructure.

Other principal factors affecting our market include:



application performance, including consistent low latency and
high bandwidth;

We believe that we compete favorably with our competitors on the
basis of these factors.

Our storage memory platform competes with various traditional
data center architectures, including high performance server and
storage approaches. These may include offerings from traditional
data storage providers, including storage array vendors such as
EMC Corporation, Hitachi Data Systems and NetApp Inc., who
typically sell centralized storage products as well as
high-performance storage approaches utilizing solid state disks,
as well as vertically integrated appliance vendors such as
Oracle. In addition, we may also compete with enterprise solid
state disk vendors such as Huawei Technologies, Co., Intel
Corp., LSI Corporation, Micron Technology, Inc., Samsung
Electronics, Inc., Seagate Technology, STEC, Inc., Toshiba Corp.
and Western Digital Corp. A number of new, privately held
companies are currently attempting to enter our market, one or
more of which may become significant competitors in the future.

Many of our current competitors have, and some of our potential
competitors could have, longer operating histories, greater name
recognition, larger customer bases and significantly greater
financial, technical, sales, marketing and other resources than
we have. Potential customers may prefer to purchase from their
existing suppliers rather than a new supplier regardless of
product performance or features. Some of our competitors have
made acquisitions of businesses that allow them to offer more
directly competitive and comprehensive solutions than they had
previously offered. In addition, some of our competitors may
sell at zero or negative margins to gain business. Our current
and potential competitors may also establish cooperative
relationships among themselves or with third parties. As a
result, we cannot assure that our products will continue to
compete favorably, and any failure to do so could seriously harm
our business, operating results and financial condition.

We had 3 issued patents and 59 patent applications in the United
States and 84 corresponding patent applications in foreign
countries, as of February 28, 2011, relating to
non-volatile solid-state storage, non-volatile solid-state
memory, software acceleration, and related technologies. We
cannot assure you whether any of our patent applications will
result in the issuance of a patent or whether the examination
process will require us to narrow our claims. Any patents that
may issue may be contested, circumvented, found unenforceable or
invalidated, and we may not be able to prevent third parties
from infringing them.

We generally control access to and use of our proprietary
software and other confidential information through the use of
internal and external controls, including contractual
protections with employees, contractors, customers and partners,
and our software is protected by U.S. and international
copyright laws. Despite our efforts to protect our trade secrets
and proprietary rights through intellectual property rights,
licenses and confidentiality agreements, unauthorized parties
may still copy or otherwise obtain and use our software and
technology. In addition, we intend to expand our international
operations, and effective patent, copyright, trademark and trade
secret protection may not be available or may be limited in
foreign countries.

Third parties could claim that our products or technologies
infringe their proprietary rights. The data storage industry is
characterized by the existence of a large number of patents,
trademarks and copyrights and by frequent litigation based on
allegations of infringement or other violations of intellectual
property rights. We expect that infringement claims may further
increase as the number of products and competitors in our market
increase. In addition, to the extent that we gain greater
visibility and market exposure as a public company, we face a
higher risk of being the subject of intellectual property
infringement claims from third parties. We cannot assure you
that we do not currently infringe, or that we will not in the
future infringe, upon any third-party patents or other
proprietary rights.

Employees

We believe the expertise of our people and our technology
focused culture is a key enabler of our technology leadership.
Our team has a broad range of expertise across operating
systems, datacenter software, systems, storage, networking and
servers. As of December 31, 2010, we had 348 full-time
employees, including 181 in sales and marketing, 114 in research
and development and 53 in general and administrative activities.
None of our employees is represented by a labor organization or
is a party to any collective bargaining arrangement, we have
never had a work stoppage and we consider our relationship with
our employees to be good.

Our headquarters occupy approximately 118,000 square feet
in Salt Lake City, Utah under leases that expire in September
2021. We have an option to extend these leases to September
2026. Our principal office for sales and marketing occupies
approximately 14,000 square feet in San Jose,
California, under a lease that expires in May 2013. We have an
additional research and development office in Boulder, Colorado.
We lease space in locations throughout the United States and
various international locations for operations and sales
personnel. We believe that our current facilities are adequate
to meet our ongoing needs and that, if we require additional
space, we will be able to obtain additional facilities on
commercially reasonable terms.

Legal
Proceedings

We are not currently a party to any material litigation or other
material legal proceedings. We may, from time to time, be
involved in various legal proceedings arising from the normal
course of business activities, and an unfavorable resolution of
any of these matters could materially affect our future results
of operations, cash flows or financial position.

The following table provides information regarding our executive
officers, a key employee and directors as of February 28,
2011:

Name

Age

Position(s)

Executive Officers:

David A. Flynn

41

Chief Executive Officer, President and Director

Dennis P. Wolf

58

Chief Financial Officer and Executive Vice President

Neil A. Carson

34

Chief Technology Officer and Executive Vice President

James L. Dawson

49

Executive Vice President, Worldwide Sales

Shawn J. Lindquist

41

Chief Legal Officer, Executive Vice President and Secretary

Lance L. Smith

47

Chief Operating Officer and Executive Vice President

Rick C. White

41

Chief Marketing Officer, Executive Vice President and Director

Saul H. Zales

49

Executive Vice President, Business Development

Key Employee:

Stephen G. Wozniak

60

Chief Scientist

Other Directors:

Forest Baskett, Ph.D.(3)

67

Director

H. Raymond Bingham(1)(2)

65

Director

Dana L. Evan(1)(2)

51

Director

Scott D. Sandell(2)(3)

46

Director

Christopher J. Schaepe(1)(3)

47

Director

(1)

Member of our audit committee.

(2)

Member of our compensation committee.

(3)

Member of our nominating and governance committee.

David A. Flynn is one of our founders and has served as a
director since July 2006. Mr. Flynn has served as our Chief
Executive Officer and President since March 2010 and previously
served as our President from inception to February 2009 and
Chief Technology Officer from inception to March 2010. From
November 2004 to October 2006, Mr. Flynn served as chief
scientist of Realm Systems, Inc., a company offering research
and development services for developing mobile computing
platforms. From January 2002 to November 2004, Mr. Flynn
served as chief architect software engineer of Linux Networx,
Inc., a developer of high performance computing technology. From
1996 to 2002, Mr. Flynn served as senior software engineer
of Liberate Technologies, Inc. Mr. Flynn holds a B.S. in
Computer Science from Brigham Young University. We believe
Mr. Flynn possesses specific attributes that qualify him to
serve as a member of our board of directors, including the
perspective and experience he brings as our Chief Executive
Officer and President, one of our founders and a significant
stockholder.

Dennis P. Wolf has served as our Chief Financial Officer
and Executive Vice President since November 2009. From January
2009 to April 2009, Mr. Wolf served as interim chief
executive officer and chief financial officer of Finjan
Software, Inc., a provider of web security solutions. From March
2005 to June 2008, Mr. Wolf served as executive vice
president and chief financial officer of MySQL AB, an open
source database software company. Prior to MySQL, Mr. Wolf
held financial management positions for public high technology
companies, including Apple Computer, Inc., Centigram
Communications, Inc., Credence Systems Corporation, Omnicell,
Inc., Redback Networks Inc. and Sun Microsystems, Inc.
Mr. Wolf currently serves as a director of BigBand
Networks, Inc., Codexis, Inc. and Quantum Corporation, where he
is also a member of their respective audit committees, and has
been a director and chair of the audit committee for other
publicly and privately held companies

including Registry Magic, Inc., Avanex Corporation, Komag, Inc.
and Vitria Technology, Inc. He holds a B.A. from the University
of Colorado and an M.B.A. from the University of Denver.

Neil A. Carson has served as our Chief Technology Officer
and Executive Vice President since March 2010. From December
2007 to January 2010, Mr. Carson served as chief
application architect for Dell services, Dell Inc., a computer
hardware, software and peripherals company. From June 2005 to
December 2007, Mr. Carson served as chief architect of
Everdream Corporation, a software-as-a-service systems
management company. From 2003 to June 2005, Mr. Carson
served as principal engineer of Remedy software products at BMC
Software, Inc., an IT service management company. From 1997 to
2003, Mr. Carson served as principal architect of Liberate
Technologies, Inc. From 1995 to 1997, Mr. Carson served as
director of Causality Limited, an embedded systems software
company. Mr. Carson holds a B.Eng. degree from the Royal
Military College of Science at Cranfield University.

James L. Dawson has served as our Executive Vice
President, Worldwide Sales since May 2009. From 2004 to April
2009, Mr. Dawson served as vice president of worldwide
sales of 3PAR Inc., a storage solutions company. From 2002 to
2004, Mr. Dawson served as vice president, strategic sales
and business development of Neoscale Systems, Inc., an
enterprise storage security company. From 2000 to 2002,
Mr. Dawson served as vice president of worldwide sales for
Scale Eight, Inc., a storage solutions company. From 1987 to
2000, Mr. Dawson served in various positions with Data
General Corporation, a supplier of storage and enterprise
computing solutions, most recently as vice president of EMEA and
Asia Pacific for its CLARiiON Storage Division. Mr. Dawson
holds a B.A. in Economics from Weber State University.

Shawn J. Lindquist has served as our Chief Legal Officer,
Executive Vice President and Secretary since February 2010. From
2005 to January 2010, Mr. Lindquist served as chief legal
officer, senior vice president and secretary of Omniture, Inc.,
an online marketing and web analytics company.
Mr. Lindquist was a corporate and securities attorney at
Wilson Sonsini Goodrich & Rosati, P.C. from 2001
to 2005 and from 1997 to 1999. Mr. Lindquist has also
served as in-house corporate and mergers and acquisitions
counsel for Novell, Inc., and as vice president and general
counsel of a privately held, venture-backed company.
Mr. Lindquist is also an adjunct professor of law at the J.
Reuben Clark Law School at Brigham Young University.
Mr. Lindquist holds a B.S. in Business Management-Finance
and a J.D. from Brigham Young University.

Lance L. Smith has served as our Chief Operating Officer
and Executive Vice President since June 2008. From January 2003
to May 2008, Mr. Smith served as vice president and general
manager of RMI Corporation, a semiconductor company. From 2000
to 2002, Mr. Smith served as senior vice president,
business development of Raza Foundries, Inc., a broadband
networking and communications investment company, and served in
various interim executive roles at Pacific Broadband
Communications, Inc., Acirro, Inc. and Omnishift Technologies
Inc. He also served as the director of commercial segment
marketing and director of technical marketing for the
computational products group of Advanced Micro Devices, Inc.,
the x86 microprocessor and video card maker, and had management
roles at technology companies NexGen, Inc. and Chips and
Technologies, Inc. Mr. Smith holds a B.S. in Electrical
Engineering from Santa Clara University.

Rick C. White is one of our founders and has served as a
director since July 2006. Mr. White has served as our Chief
Marketing Officer since 2008. From inception to February 2008,
Mr. White served as our Chief Executive Officer. From 2006
to January 2007, Mr. White served as Chairman of DAZ
Productions, Inc., a developer of 3D graphics software and
content. From 2002 to 2005, Mr. White served as chief
executive officer of Realm Systems, Inc. From 2000 to 2005,
Mr. White served as Chairman of Forum Systems, Inc. a
developer of XML enterprise messaging systems. From 1997 to
2000, Mr. White served as chief executive officer and
chairman of Phobos Corporation, a developer of PCI based
switching and load balancing technology for data centers. In
April 2005, Mr. White filed for personal bankruptcy and was
discharged under Chapter 7 of the U.S. Bankruptcy Code
in February 2009. We believe Mr. White brings to our board
of directors the perspective and experience he brings as an
officer, one of our founders and a significant stockholder.

Saul H. Zales has served as our Executive Vice President,
Corporate Development since October 2010. From April 2008 to
August 2010, Mr. Zales served as vice president, general
manager of corporate development of Numonyx B.V., a Flash memory
manufacturer. From 1984 to March 2008, Mr. Zales served in
various positions at Intel Corporation, a semiconductor
technology company, most recently as director of business
development for Intels Flash Memory Group. Mr. Zales
holds a B.S. in Electrical Engineering from the University of
Pennsylvania.

Stephen G. Wozniak has served as our Chief Scientist
since December 2008. From 1971 to 1976, Mr. Wozniak held
engineering positions within HP. In 1976, Mr. Wozniak
co-founded Apple Computer, Inc., now Apple Inc. In 1985,
Mr. Wozniak was awarded the National Medal of Technology,
for his role in the development and introduction of the personal
computer. After leaving Apple in 1985, Mr. Wozniak was
involved in various business and philanthropic ventures,
focusing primarily on computer capabilities in schools,
stressing hands-on learning and encouraging creativity for
students. In 2000, Mr. Wozniak was inducted into the
National Inventors Hall of Fame, and he was awarded the Heinz
Award in Technology, the Economy and Employment. He also
co-founded the Electronic Frontier Foundation, and was a
founding sponsor of the Tech Museum, Silicon Valley Ballet and
Childrens Discovery Museum of San Jose.
Mr. Wozniak holds a B.S. in Electrical Engineering and
Computer Sciences from the University of California, Berkeley.

Forest Baskett, Ph.D. has served as a director since
March 2008. Dr. Baskett has been a general partner of New
Enterprise Associates, a venture capital firm, since 2004.
Dr. Baskett joined New Enterprise Associates in 1999. From
1986 to 1999, Dr. Baskett served as chief technology
officer and senior vice president, research and development of
Silicon Graphics, Inc. Dr. Baskett founded and directed the
Western Regional Laboratory of Digital Equipment Corporation
from 1982 to 1986. From 1971 to 1982, Dr. Baskett was a
professor of Computer Science and Electrical Engineering at
Stanford University. In addition to serving on our board of
directors, Dr. Baskett serves on various private company
boards. Dr. Baskett holds a B.A. in Mathematics from Rice
University, a Ph.D. in Computer Science from the University of
Texas at Austin and is a member of the National Academy of
Engineering. We believe that Dr. Baskett possesses specific
attributes that qualify him to serve as a member of our board of
directors, including his experience with a wide range of
technology companies and the venture capital industry.

H. Raymond Bingham has served as a director since
February 2011. Mr. Bingham has been an advisory director of
General Atlantic LLC, a private equity firm, since January 2010
and managing director and head of the Palo Alto office from
September 2006 to December 2009. From August 2005 to August
2006, Mr. Bingham was a self-employed private investor.
From 1993 to 2005, Mr. Bingham served in various positions
at Cadence Design Systems, Inc., a supplier of electronic design
automation software and services, including executive chairman
of the board of directors, president and chief executive officer
and executive vice president and chief financial officer.
Mr. Bingham also currently serves as a director of Oracle
Corporation, Flextronics International Ltd., STMicroelectronics
N.V., Spansion Inc. and Dice Holdings, Inc. Mr. Bingham
holds a B.S. from Weber State University and an M.B.A. from
Harvard Business School. We believe that Mr. Bingham
possesses specific attributes that qualify him to serve as a
member of our board of directors, including his experience in
leading and managing a large, complex global organization in the
technology industry and financial expertise and significant
audit and financial reporting knowledge.

Dana L. Evan has served as a director since February
2011. Since July 2007, Ms. Evan has invested in and served
on the boards of directors of companies in the Internet,
technology and media sectors, including Omniture, Inc. From May
1996 until July 2007, Ms. Evan served as chief financial
officer of VeriSign, Inc., a provider of intelligent
infrastructure services for the Internet and telecommunications
networks. Previously, Ms. Evan worked as a financial
consultant in the capacity of chief financial officer, vice
president of finance or corporate controller over an eight-year
period for various public and private companies and
partnerships, including VeriSign, Inc., Delphi Bioventures, a
venture capital firm, and Identix Incorporated, a
multi-biometric technology company. Prior to serving as a
financial consultant, Ms. Evan worked in a variety of
positions at KPMG LLP, most recently as senior manager.
Ms. Evan also serves on the board of directors of a number
of privately held companies.

Ms. Evan is a certified public accountant (inactive) and
holds a B.S. in Commerce with a concentration in Accounting and
Finance from Santa Clara University. We believe that
Ms. Evan possesses specific attributes that qualify her to
serve as a member of our board of directors, including broad
expertise in operations, strategy, accounting, financial
management and investor relations at both publicly and privately
held technology and Internet companies.

Scott D. Sandell has served as a director since March
2008. In 1996, Mr. Sandell joined New Enterprise
Associates, where he became a general partner in 2000. In
addition to serving on our board of directors, Mr. Sandell
is a director of Spreadtrum Communications, Inc. and various
private companies. Mr. Sandell started his career at the
Boston Consulting Group and later joined C-ATS Software, Inc.
Later, he worked as a Product Manager for Windows 95 at
Microsoft Corporation before joining New Enterprise Associates
in 1996. Mr. Sandell is a member of the board of directors
of the National Venture Capital Association. Mr. Sandell
holds an A.B. in Engineering Sciences from Dartmouth College and
an M.B.A. from the Stanford Graduate School of Business. We
believe that Mr. Sandell possesses specific attributes that
qualify him to serve as a member of our board of directors,
including his experience with a wide range of technology
companies and the venture capital industry.

Christopher J. Schaepe has served as a director since
April 2009. Mr. Schaepe is a founding managing director of
Lightspeed Venture Partners, a venture capital firm. Prior to
joining Lightspeed in September 2000, he was a general partner
at Weiss, Peck & Greer Venture Partners, a venture
capital firm, which he joined in 1991. In addition to serving on
our board of directors, Mr. Schaepe is a director of
Riverbed Technology, Inc. and various private companies.
Mr. Schaepe holds B.S. and M.S. degrees in Computer Science
and Electrical Engineering from the Massachusetts Institute of
Technology and an M.B.A. from the Stanford Graduate School of
Business. We believe that Mr. Schaepe possesses specific
attributes that qualify him to serve as a member of our board of
directors, including his experience with a wide range of
technology companies and the venture capital industry.

Our executive officers are appointed by our board of directors
and serve until their successors have been duly elected and
qualified. There are no family relationships among any of our
directors or executive officers.

Codes of Business
Conduct and Ethics

Our board of directors has adopted a code of business conduct
and ethics that applies to all of our employees, officers and
directors, including our Chief Executive Officer, Chief
Financial Officer and other executive and senior financial
officers.

Board of
Directors

Our bylaws permit our board of directors to establish by
resolution the authorized number of directors. Currently, seven
directors are authorized, consisting of members determined as
follows:



holders of shares of our Series A convertible preferred
stock, voting as a separate class, are entitled to elect two
members (currently Dr. Baskett and Mr. Sandell);



holders of shares of our Series B convertible preferred
stock, voting as a separate class, are entitled to elect one
member (currently Mr. Schaepe);



holders of shares of common stock, voting as a separate class,
are entitled to elect three members (currently Ms. Evan and
Messrs. Flynn and White); and



holders of shares of our convertible preferred stock, voting as
a separate class, and holders of shares of our common stock,
voting as a separate class, are entitled to elect one member
(currently Mr. Bingham).

The current members of our board of directors will continue to
serve as directors until their resignations or until their
successors are duly elected by the holders of our common stock,
notwithstanding the automatic conversion of all outstanding
shares of convertible preferred stock into shares of our common
stock and the termination of a voting agreement between us and
certain of our stockholders upon the completion of this offering.

As of the completion of this offering, our certificate of
incorporation and bylaws will provide for a classified board of
directors consisting of three classes of directors, each serving
staggered three-year terms, as follows:



the Class I directors will be Messrs. Schaepe, and
White, and their terms will expire at the annual meeting of
stockholders to be held in 2012;



the Class II directors will be Dr. Baskett and
Ms. Evan, and their terms will expire at the annual meeting
of stockholders to be held in 2013; and



the Class III directors will be Messrs. Bingham,
Flynn, and Sandell, and their terms will expire at the annual
meeting of stockholders to be held in 2014.

Upon expiration of the term of a class of directors, directors
for that class will be elected for three-year terms at the
annual meeting of stockholders in the year in which that term
expires. Each directors term continues until the election
and qualification of his successor, or his earlier death,
resignation or removal. Any increase or decrease in the number
of directors will be distributed among the three classes so
that, as nearly as possible, each class will consist of
one-third of the directors. This classification of our board of
directors may have the effect of delaying or preventing changes
in control of our company.

Director
Independence

Upon the completion of this offering, our common stock will be
listed on the New York Stock Exchange. Under the rules of the
New York Stock Exchange, independent directors must comprise a
majority of a listed companys board of directors within a
specified period of the completion of this offering. In
addition, the rules of the New York Stock Exchange require that,
subject to specified exceptions, each member of a listed
companys audit, compensation and nominating and governance
committees be independent. Under the rules of the New York Stock
Exchange, a director will only qualify as an independent
director if, in the opinion of that companys board
of directors, that person does not have a relationship that
would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. Audit committee
members must also satisfy the independence criteria set forth in
Rule 10A-3
under the Securities Exchange Act of 1934, as amended.

In order to be considered to be independent for purposes of
Rule 10A-3,
a member of an audit committee of a listed company may not,
other than in his or her capacity as a member of the audit
committee, the board of directors, or any other board committee:
(1) accept, directly or indirectly, any consulting,
advisory, or other compensatory fee from the listed company or
any of its subsidiaries; or (2) be an affiliated person of
the listed company or any of its subsidiaries.

In March 2011, our board of directors undertook a review of the
independence of each director and considered whether each
director had a material relationship with us that could
compromise his or her ability to exercise independent judgment
in carrying out his or her responsibilities. As a result of this
review, our board of directors determined that Ms. Evan,
Dr. Baskett and Messrs. Bingham, Sandell and Schaepe,
representing five of our seven directors, were independent
directors as defined under the applicable rules and
regulations of the Securities and Exchange Commission, or SEC,
and the listing requirements and rules of the New York Stock
Exchange.

Our board of directors has an audit committee, a compensation
committee and a nominating and governance committee, each of
which will have the composition and responsibilities described
below. Members serve on these committees until their resignation
or until otherwise determined by our board of directors.

Audit
Committee

Ms. Evan and Messrs. Bingham and Schaepe, each of whom
is a non-employee member of our board of directors, comprise our
audit committee. Ms. Evan is the chair of our audit
committee. Our board of directors has determined that each of
the members of our audit committee satisfies the requirements
for independence and financial literacy under the rules and
regulations of the New York Stock Exchange and the SEC. Our
board of directors has also determined that Ms. Evan
qualifies as an audit committee financial expert as
defined in the SEC rules and satisfies the financial
sophistication requirements of the New York Stock Exchange. The
audit committee is responsible for, among other things:



selecting and hiring our independent registered public
accounting firm, and approving the audit and pre-approving any
non-audit services to be performed by our independent registered
public accounting firm;



evaluating the performance and independence of our independent
registered public accounting firm;



monitoring the integrity of our financial statements and our
compliance with legal and regulatory requirements as they relate
to financial statements or accounting matters;



reviewing the adequacy and effectiveness of our internal control
policies and procedures and our disclosure controls and
procedures;



overseeing procedures for the treatment of complaints on
accounting, internal accounting controls or audit matters;



overseeing our internal auditors;



discussing the scope and results of our annual audit with the
independent registered public accounting firm and reviewing with
management and the independent registered public accounting firm
our interim and year-end operating results; and



preparing the audit committee report that the SEC will require
in our annual proxy statement.

Compensation
Committee

Ms. Evan and Messrs. Bingham and Sandell, each of whom
is a non-employee member of our board of directors, comprise our
compensation committee. Mr. Bingham is the chair of our
compensation committee. Our board of directors has determined
that each member of our compensation committee meets the
requirements for independence under the rules of the New York
Stock Exchange and is an outside director for
purposes of Section 162(m) of the Internal Revenue Code.
The compensation committee is responsible for, among other
things:

Messrs. Sandell and Schaepe and Dr. Baskett, each of
whom is a non-employee member of our board of directors,
comprise our nominating and governance committee.
Dr. Baskett is the chair of our nominating and governance
committee. Our board of directors has determined that each
member of our nominating and governance committee meets the
requirements for independence under the rules of the New York
Stock Exchange. The nominating and governance committee is
responsible for, among other things:



assisting our board of directors in identifying prospective
director nominees and recommending nominees for each annual
meeting of stockholders to the board of directors;

reviewing and monitoring compliance with our code of business
conduct and ethics; and



recommending potential members for each board committee to our
board of directors.

Compensation
Committee Interlocks and Insider Participation

None of the members of our compensation committee is an officer
or employee of our company. None of our executive officers
currently serves, or in the past year has served, as a member of
the compensation committee (or other board committee performing
equivalent functions or, in the absence of any such committee,
the entire board of directors) of any entity that has one or
more executive officers serving on our compensation committee.

Non-Employee
Director Compensation

Our directors do not currently receive any cash compensation for
their services as directors or as board committee members. Other
than reimbursement of reasonable travel and related expenses
incurred by non-employee directors in connection with their
attendance at meetings of the board of directors and its
committees, we did not pay any other fees or make any non-equity
awards to or pay any other compensation to our non-employee
directors in fiscal 2010. We anticipate adopting a formal
non-employee director compensation policy in connection with
this offering.

On February 19, 2011, Dr. Baskett and
Messrs. Sandell and Schaepe were each granted an option to
purchase 50,000 shares of common stock at an exercise price
per share of $5.12, and Mr. Bingham and Ms. Evan were
each granted an option to purchase 100,000 shares of common
stock at an exercise price per share of $5.12. These options
vest as to 25% of the total number of shares issued pursuant to
the exercise of the option will become vested on the first
anniversary of the vesting commencement date and the remaining
shares subject to the option shall vest at a rate of
1/48th of
the total number of shares subject to the option on the last day
of each month thereafter, subject to such directors
continued service to us on each such vesting date. These options
will fully vest following a change of control as defined in the
respective option agreements.

The following is a discussion and analysis of the compensation
arrangements of our named executive officers who are listed in
the 2010 Summary Compensation Table, which provides detailed
compensation information related to these individuals. This
discussion contains forward-looking statements that are based on
our current considerations, expectations and determinations
regarding future compensation programs. The actual amount and
form of compensation and the compensation programs that we adopt
may differ materially from current or planned programs as
summarized in this discussion.

General
Compensation Philosophy

Our general executive compensation philosophy is to provide
programs that attract, motivate, reward and retain highly
qualified executives and motivate them to pursue our corporate
objectives while encouraging the creation of long-term value for
our stockholders. We evaluate and reward our executive officers
through compensation intended to motivate them to identify and
capitalize on opportunities to grow our business and maximize
stockholder value over time. We strive to provide an executive
compensation program that is market competitive, rewards
achievement of our business objectives and is designed to
provide a foundation of fixed compensation (base salary) and a
significant portion of performance-based compensation
(short-term and long-term incentive opportunities) that are
intended to align the interests of executives with those of our
stockholders.

Compensation
Decision Process

Our historical executive compensation program reflects our
relatively short operating history and small size. Until
recently, in efforts to control expenditures and allocate our
limited resources, we had not engaged compensation consultants
or established formal benchmark processes against any set of
peer group companies.

Prior to July 2010, our compensation program was administered by
our board of directors with substantial input from our Chief
Executive Officer. Our Chief Executive Officer periodically
reviewed the compensation of our executive management and made
recommendations with respect to base salary and other cash
incentive compensation for each named executive officer to our
board of directors. With respect to his own compensation, the
Chief Executive Officer engaged the board of directors in
discussions and made recommendations to them for his own
compensation. The board of directors made the final decision on
named executive officer compensation and has had the ability to
accept or reject the Chief Executive Officers
recommendations for all named executive officers, including the
Chief Executive Officer. Additionally, the board of directors
discussed the Chief Executive Officers compensation with
him, but made final decisions regarding his compensation in
meetings outside of his presence.

In determining compensation for fiscal 2010, the board of
directors relied on its general experience in reviewing the
recommendations of the Chief Executive Officer and approving
each compensation element.

In July 2010, we initiated efforts with respect to our
compensation program that we expect to use on an ongoing basis
and determined that our compensation committee will be
responsible for reviewing and approving compensation for our
executive officers in future periods.

Subsequent to fiscal 2010, the compensation committee engaged
Compensia, Inc., or Compensia, an independent executive
compensation consulting firm from which we have obtained
relevant compensation data and will continue to do so in the
future. Our compensation committee, Compensia and our management
will work together to choose a public company peer group for
executive compensation purposes in the future. These companies
will be chosen from a group of similar publicly

traded companies, taking into account size and growth potential.
We consulted with Compensia to establish reference points and
guidelines with respect to equity compensation as well as with
respect to change of control and severance arrangements. We
expect that following our initial public offering we will
benchmark our compensation relative to data from our public
company peer group (which may change over time). The
compensation committee also intends to review industry survey
data prepared by Compensia, including Compensias executive
and equity compensation assessment, and the Radford Global
Technology Survey.

Weighting of
Elements of Compensation Program

We do not have any predetermined formula or target for
allocating compensation between short- and long-term, fixed and
variable or cash and non-cash compensation. As a privately held
company, executive compensation has been weighted toward equity,
which has been awarded in the form of stock options. The board
of directors determined that this form of compensation focused
our executives on driving achievement of our strategic and
financial goals. The board of directors also believes that
making stock options a key component of executive compensation
aligns the executive team with the long-term interests of our
stockholders. We have also offered cash compensation in the form
of base salaries to reward individual contributions and
compensate our employees for their
day-to-day
responsibilities, and annual bonuses to drive excellence and
leadership and reward our employees in the achievement of our
short-term objectives.

Principal
Elements of Executive Compensation

Components of
Named Executive Officer Compensation

The compensation program for our named executive officers
consists of:



base salary;



incentive cash compensation;



stock options; and



change of control and severance arrangements.

We believe that our compensation packages are properly designed
to attract and retain qualified individuals, link individual
performance to company performance, focus the efforts of our
named executive officers on the achievement of both our
short-term and long-term objectives, and align the interests of
our named executive officers with those of our stockholders.

As our needs evolve and circumstances require, we intend to
continue to evaluate our philosophy and compensation program. At
a minimum, we intend to review executive compensation annually.

Base
Salaries

Base salary typically will be used to recognize the experience,
skills, knowledge and responsibilities required of each named
executive officer, although competitive market conditions also
may play a role in setting the level of base salary. We do not
apply specific formulas to determine changes in base salary.
Rather, the base salaries of our named executive officers have
historically been reviewed on a periodic basis and adjustments
have been made to reflect our economic condition and future
expected performance, as well as what our named executive
officers could be expected to receive if employed at companies
similarly situated to ours and our overall subjective assessment
of appropriate salary levels, while being mindful of the need to
conserve cash resources.

2010 Base
Salaries

The fiscal 2010 base salaries were set by our board of directors
based on the recommendations of our Chief Executive Officer and
were set to reflect our status as a private company. Based on
the

general knowledge and experience of the board of directors and
the Chief Executive Officer, we believe our 2010 base salary
ranges for our named executive officers were within the ranges
of base salaries for private companies.

Name

FY 2010 Base
Salary ($)

David A. FlynnChief Executive Officer and President

240,000

(1)

Dennis P. WolfChief Financial Officer and Executive Vice President

220,000

James L. DawsonExecutive Vice President of Worldwide Sales

225,000

Rick C. WhiteChief Marketing Officer and Executive Vice President

220,000

Lance L. SmithChief Operating Officer and Executive Vice President

220,000

David R. BradfordFormer Chief Executive Officer

240,000

(1)

Mr. Flynns annual base salary was increased from
$220,000 to $240,000, effective in April 2010.

Effective as of March 23, 2010, Mr. Bradford resigned
as our President and Chief Executive Officer and assumed the
position of Chairman of the board of directors until February
2011. Mr. Bradford continued to serve as our full-time
employee until September 30, 2010. Since that time, he has
provided advisory services to the Chief Executive Officer and
the board of directors. The board of directors took into
consideration the responsibilities and role of
Mr. Bradford, and determined to maintain his base salary at
the same level that he was paid prior to his resignation as
President and Chief Executive Officer through December 31,
2010, as part of transitioning his duties to Mr. Flynn.

Concurrent with Mr. Bradfords resignation,
Mr. Flynn was promoted to Chief Executive Officer,
effective April 7, 2010, and received an increase to his
base salary to $240,000.

Incentive Cash
Compensation

Our compensation objective is to have a significant portion of
each named executive officers compensation tied to
performance. We provide performance-based cash incentive
opportunities for certain employees, including our named
executive officers, that are paid based on corporate and/or
individual performance. Other than Mr. Dawson, each of our named
executive officers has a pre-set bonus target that is stated as
a percentage of base salary  66
2/3%
for Mr. Flynn and 50% for the remainder. Actual cash incentive
payouts have been determined historically by our board of
directors, in consultation with our Chief Executive Officer. In
future fiscal years, our compensation committee, in consultation
with our Chief Executive Officer, will be responsible for
setting the parameters for performance-based cash incentives,
including, but not limited to, determining applicable
performance objectives and target and actual achievement of
these objectives. These parameters may change from year to year,
as we and our market mature and different priorities are
established, but they will continue to be set, and performance
against them determined or approved, by our compensation
committee.

2010 Incentive
Cash Compensation

Although we did not have a formal performance-based cash
incentive plan in place during fiscal 2010, in July 2010, our
board of directors reviewed our business performance and its
desire to recognize the achievements of our management team. The
board of directors did not have pre-set goals and did not base
the overall bonus pool or the individual bonus payouts on a
specific formula, although it did consider the target
percentages of base salary listed above. Instead, the board of

directors approval of bonus payouts for fiscal 2010 in
general was based on our positive operating results, such as
increased revenue, expansion and enhancement of our product
lines, and growth in our customer base, and the total bonus pool
was based on its subjective view of a reasonable and appropriate
amount. The board of directors approved the largest bonus
payout, in the amount of $192,000, to Mr. Flynn because of his
leadership of the entire company and our overall improving
business results. For our other named executive officers, Mr.
Flynn recommended individual bonus payouts to our board of
directors, which then approved the amounts listed below in the
2010 Summary Compensation Table. The amounts vary because of the
different levels of responsibilities and length of service
during the fiscal year as well as differences among base
salaries and, but they do not reflect a specific percentage
achievement of goals.

Mr. Dawson participated in a sales commission plan, based
on the achievement of quarterly bookings and certain additional
commissions if target bookings were exceeded. We have not
disclosed the specific formulae or performance targets contained
in this plan for several reasons, including our belief that
disclosure would result in competitive harm.
Mr. Dawsons bonus formula includes bookings quotas,
revenue and gross margin targets and commission rates. We do not
publicly disclose this information and, if disclosed, we believe
the information would provide competitors and others with
insights into our operations that would be harmful to us.
Concurrent with the annual bonus payouts described above, the
compensation committee agreed to pay to Mr. Dawson
aggregate commissions of $252,973, which reflected achievement
of the quarterly booking quotas plus additional amounts for
exceeding the annual bookings quotas and quarterly gross margin
targets.

Long-Term
Equity-Based Incentive Compensation

We believe that strong long-term corporate performance is
achieved with a corporate culture that encourages a long-term
focus by our named executive officers through the use of
equity-based awards, the value of which depends on our stock
performance. Our equity-based incentives to date have been
granted in the form of stock options. We grant stock options to
provide our named executive officers with incentives to help
align their interests with the interests of our stockholders and
to enable them to participate in the long-term appreciation of
the value of our stock. Additionally, stock options provide an
important tool for us to retain our named executive officers, as
the options are subject to vesting over an extended period of
time subject to continued service with us.

Historically, we have not had an established set of criteria for
granting equity awards; instead, the board of directors
exercised its judgment and discretion, in consultation with our
Chief Executive Officer, and considered, among other things, the
role and responsibility of the named executive officer,
competitive factors, the amount of stock-based equity
compensation already held by the named executive officer, and
the cash-based compensation received by the named executive
officer, to determine its recommendations for stock options. We
do not have, nor do we plan to establish, any program, plan or
practice to time stock option grants in coordination with
releasing material non-public information.

Equity
Grants

In May 2010, Mr. Flynn was granted an option to purchase
2,484,646 shares of our common stock, in connection with
his promotion to the role of Chief Executive Officer. In
determining the numbers of shares covered by this option grant,
the board of directors reviewed Mr. Flynns equity
holdings, and considered that this number of shares would
provide Mr. Flynn with appropriate incentives to remain
with us and continue to drive the success of our business.

In September 2009, Mr. Smith was granted an option to purchase
100,000 shares of our common stock. In determining the numbers
of shares covered by this option grant, the board of directors
reviewed Mr. Smiths equity holdings, and determined that
this number of shares would provide Mr. Smith with appropriate
incentives to remain with us and continue to drive the success
of our business.

In November 2009, Mr. Wolf was granted an option to purchase
730,000 shares of our common stock, in connection with the
commencement of his employment by us. The numbers of shares
covered by this option grant was negotiated with Mr. Wolf in
connection with the start of his employment.

Stock Ownership
Guidelines

At this time, the board of directors has not adopted stock
ownership guidelines with respect to the named executive
officers or for the board of directors itself although it may
consider doing so in the future. In connection with this
offering, we will establish an insider trading compliance policy
that prohibits, among other things, short sales, hedging of
stock ownership positions, and transactions involving derivative
securities relating to our common stock.

Perquisites

Our named executive officers are eligible to participate in the
same group insurance and employee benefit plans as our other
salaried employees. We provide employee benefits to all eligible
employees, including our named executive officers, which the
compensation committee believes are reasonable and consistent
with our overall compensation objective to better enable us to
attract and retain employees. These benefits include 401(k),
medical, dental, vision, life insurance and disability benefits
and other plans and programs made available to other eligible
employees in the applicable country of residence. At this time,
we do not provide special plans or programs for our named
executive officers. Accordingly, employee benefits and
perquisites are reviewed from time to time only to ensure that
benefit levels remain competitive for the company as a whole,
but are not included in the compensation committees annual
determination of a named executive officers compensation
package.

Change of
Control and Severance Benefits

Our board of directors and compensation committee consider
maintaining a stable and effective management team to be
essential in protecting and enhancing the best interests of us
and our stockholders. We have established change of control and
severance arrangements with our named executive officers to
provide assurances of specified severance benefits if their
employment is subject to involuntary termination or voluntary
termination for good reason other than for death, disability or
cause. We believe that it is imperative to provide these
individuals with severance benefits upon certain reasons for
terminations of employment, which we recognize can be triggered
at any time, to secure their continued dedication to their work,
notwithstanding the possibility of a termination by us, and
provide these individuals with an incentive to continue
employment with us. We believe that the severance benefits are
competitive relative to the severance protection provided to
similarly situated individuals at companies with which we
compete for talent and appropriate because the benefits are
subject to the executives entry into a release of claims
in favor of us.

We also recognize that the possibility of a change of control
may exist from time to time, and that this possibility, and the
uncertainty and questions it may raise among management, may
result in the departure or distraction of management to our and
our stockholders detriment. Accordingly, our board of
directors decided to take appropriate steps to encourage the
continued attention, dedication and continuity of members of our
management to their assigned duties without the distraction that
may arise from the possibility or occurrence of a change of
control.

As a result, we have agreements with each of our named executive
officers that provide additional benefits in the event of a
change of control. For more detail, see Potential Payments
Upon Termination or Change of Control.

Generally, Section 162(m) of the Internal Revenue Code
disallows a tax deduction to any publicly held corporation for
any remuneration in excess of $1.0 million paid in any
taxable year to its chief executive officer and to certain other
highly compensated officers. Remuneration in excess of
$1.0 million may be deducted if, among other things, it
qualifies as performance-based compensation within
the meaning of the Internal Revenue Code.

As we have been a privately held corporation, we have not
previously taken the deductibility limit imposed by
Section 162(m) into consideration in setting compensation
for our executive officers. Further, under a certain
Section 162(m) exception, any compensation paid pursuant to
a compensation arrangement in existence before the effective
date of this public offering will not be subject to the
$1.0 million limitation. In addition, any equity awards we
make under our 2011 Equity Incentive Plan will not be subject to
this limitation, provided such awards are made prior to the
earliest of: the expiration of the plan; a material modification
of the plan (as determined under Section 162(m)); the
issuance of all the employer stock and other compensation
allocated under the plan; or the first meeting of stockholders
at which directors are elected after the close of the third
calendar year following the year in which the public offering
occurs. We may, where reasonably practicable, seek to qualify
the variable compensation paid to our executive officers for the
performance-based compensation exemption from the
deductibility limit. As such, in approving the amount and form
of compensation for our executive officers in the future, we
will consider all elements of the cost to us of providing such
compensation, including the potential impact of
Section 162(m). Our compensation committee may, in its
judgment, authorize compensation payments that do not comply
with an exemption from the deductibility limit when it believes
that such payments are appropriate to attract and retain
executive talent.

Taxation of
Parachute Payments and Deferred
Compensation

We have not provided any named executive officer with a
gross-up
or other reimbursement payment for any tax liability that he
might owe as a result of the application of Sections 280G,
4999, or 409A of the Internal Revenue Code and we have not
agreed and are not otherwise obligated to provide any named
executive officer with such a
gross-up
or other reimbursement. Sections 280G and 4999 of the Code
provide that executive officers and directors who hold
significant equity interests and certain other service providers
may be subject to an excise tax if they receive payments or
benefits in connection with a change in control that exceeds
certain prescribed limits, and that the company, or a successor,
may forfeit a deduction on the amounts subject to this
additional tax. Section 409A also imposes additional
significant taxes on the individual in the event that an
executive officer, director or other service provider receives
deferred compensation that does not meet the
requirements of Section 409A of the Code.

Accounting
Treatment

We follow Financial Accounting Standards Board Accounting
Standards Codification Topic 718, or ASC Topic 718, for our
stock-based awards. ASC Topic 718 requires companies to measure
the compensation expense for all share-based payment awards made
to employees and directors, including stock options and
restricted stock awards, based on the grant date fair
value of these awards. This calculation is performed for
accounting purposes and reported in the compensation tables
below, even though our named executive officers may never
realize any value from their awards. FASB ASC Topic 718 also
requires companies to recognize the compensation cost of their
stock-based compensation awards in their income statements over
the period that an executive officer is required to render
service in exchange for the option or other award.

We account for equity compensation paid to our employees under
the rules of FASB ASC Topic 718, which requires us to estimate
and record an expense for each award of equity compensation

over the service period of the award. Accounting rules also
require us to record cash compensation as an expense at the time
the obligation is incurred.

2010 Summary
Compensation Table

The following table summarizes the compensation that we paid to
or was earned by our chief executive officer, chief financial
officer, each of our three other most highly compensated
executive officers and our former chief executive officer during
fiscal 2010. We refer to these officers in this prospectus as
our named executive officers.

Non-Equity

Option

Incentive Plan

Name and Principal
Position

Year

Salary ($)

Bonus ($)

Awards ($)(1)

Compensation ($)

Total ($)

David A. Flynn

2010

224,849

192,000

2,395,458

(2)



2,812,307

Chief Executive Officer and President

Dennis P. Wolf

2010

140,039

83,540

235,875



459,454

Chief Financial Officer and Executive Vice President

James L. Dawson

2010

225,000





252,973

(3)

477,973

Executive Vice President, Worldwide Sales

Lance L. Smith

2010

220,000

132,000

32,671



384,671

Chief Operating Officer and Executive Vice President

Rick C. White

2010

220,000

132,000





352,000

Chief Marketing Officer and Executive Vice President

David R. Bradford(4)

2010

240,000

144,000





384,000

Former Chief Executive Officer

(1)

The amounts included in the Option Awards column
represent the aggregate grant date fair value of option awards
calculated in accordance with FASB ASC Topic 718. The valuation
assumptions used in determining such amounts are described in
the notes to our consolidated financial statements included
elsewhere in this prospectus.

(2)

Includes $96,410 of grant date fair value for a portion of an
option that was canceled following the end of fiscal 2010.